Capital Gains Tax Valuations for Second Homes & Rental Properties

At Fallows, we provide RICS Red Book CGT valuations for second homes and investment properties across Hampshire, West Sussex, Surrey, and the wider South of England. If you are selling, gifting, or transferring a second property, an accurate valuation is vital to calculate your Capital Gains Tax liability.

Second Homes and Rental Properties – How CGT Applies

Unlike your main residence, second homes and buy-to-let properties are not covered by Principal Private Residence Relief. That means gains are usually subject to Capital Gains Tax. The exact amount depends on:

  • The purchase price and disposal value
  • Any improvement costs that can be offset
  • Ownership period and past use
  • Your income tax band (18% or 24% property CGT rates)

For landlords, valuation becomes even more important where properties are let under Assured Shorthold Tenancies, HMOs, or longer leases. Each tenancy type can affect the perceived market value and ease of disposal.

 

Why Accurate Valuations Matter

An accurate, independent valuation ensures:

  • Correct tax reporting – helps to avoid disputes with HMRC
  • Historic valuations where the property was acquired, gifted, or inherited years earlier
  • Rental considerations – understanding how tenancies, restrictions, or local licensing impact current value
  • Portfolio planning – assessing whether to sell individually or as part of a wider disposal

Holiday Homes with Planning Restrictions

Some properties carry planning restrictions that limit them to use as holiday accommodation only. These restrictions are highly binding and extremely difficult to remove, meaning such homes typically command a much lower value than comparable unrestricted houses. This must be carefully reflected in your CGT valuation.

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Frequently Asked Questions About Capital Gains Tax Valuations

Find answers to the most common questions executors, solicitors, and families ask about probate valuations and the inheritance tax process.

What is a Capital Gains Tax valuation and when is it needed?

A Capital Gains Tax valuation is an assessment of a property’s market value to calculate tax owed when the asset is sold, transferred, or gifted. It’s often required when disposing of property, selling an inherited home, or transferring assets between connected parties.

What is a historical property valuation for Capital Gains Tax?

CGT is a tax calculated on how the price of an asset has increased since you came to own it. A historical property valuation determines the value of a property at a specific date in the past if there isn't clear evidence of a purchase price. The valuation is often the date of acquisition or a key tax reference date such as 31 March 1982 so that capital gains can be calculated accurately.

How far back can HMRC request a historical valuation?

HMRC can require historical valuations going back many years and as far as 1982 depending on the asset’s ownership history. This might include valuation dates decades in the past, especially for long-held family properties or agricultural land.

Can HMRC challenge my Capital Gains Tax valuation?

Yes, HMRC can and does challenge valuations. If there is a significant difference between your valuation and theirs, they may request further evidence or refer the case to the Valuation Office Agency. Using detailed, evidence-based reports reduces this risk.

What information is needed for a CGT or historical valuation?

A valuer will typically require the property address, photographs, floor plans, land area, planning history, and details of any significant improvements since the relevant valuation date. For historical dates, local market evidence from that time will be researched by the Valuer.

How are improvements accounted for in a CGT calculation?

The cost of qualifying capital improvements (such as extensions or conversions) can be deducted from the gain, so accurate records and receipts are important.

Can a CGT valuation reduce my tax bill?

Yes, if carried out accurately and supported by evidence, a valuation can ensure you only pay tax on the actual gain. Overstating the value at acquisition (or understating at disposal) could result in paying more than necessary.