You may require a RICS valuation for tax purposes. The RICS Valuation – Global Standards 2017: UK National Supplement (UK VPGA 15) provides professional guidance for Registered Valuers to follow.

There are six purposes of a taxation valuation for residential properties:

1. Capital Gains Tax (CGT)
2. Stamp Duty Land Tax (SDLT) – England
3. Land Transactions Tax (LTT) – Wales
4. Building Transaction Tax (LBTT) – Scotland
5. Annual Tax on Enveloped Dwellings (ATED)
6. Inheritance Tax Valuations (IHT)

Capital Gains Tax

“Capital Gains Tax is a tax on the profit when you sell (or ‘dispose of’) something (an ‘asset’) that’s increased in value.”

It is payable on the sale of second homes and buy-to-let property. You may also need to pay CGT if your home is partly used as a business premises, or if you lease out part of your property.

In the UK, you pay higher rates of CGT on property than other assets. Basic-rate taxpayers pay 18% on gains they make when selling property, while higher and additional-rate taxpayers pay 28%.

All taxpayers have an annual CGT allowance, meaning they can earn a certain amount tax-free. In 2023-24 you can make tax-free capital gains of up to £6,000 – down from £12,300 in 2022-23. The allowance is due to be cut further in 2024-25, so you can earn just £3,000 tax-free.

Stamp Duty Land Tax

You must pay Stamp Duty Land Tax (SDLT) if you buy a property or land over a certain price in England and Northern Ireland. In Wales, this is referred to as Land Transaction Tax and in Scotland, Land and Buildings Transaction Tax.

You pay this tax when you:

• buy a freehold property
• buy a new or existing leasehold
• buy a property through a shared ownership scheme
• are transferring land or property in exchange for payment, for example you take on a mortgage or buy a share in a house

The amount of tax to be paid is dependent on if:

• you are a first-time buyer
• you are buying an additional property such as a second home or buy-to-let
• you are not a UK resident

Annual Tax on Enveloped Dwellings

This is an annual tax payable mainly by companies that own UK residential property that are valued at more than £500,000.

An ATED return to HMRC is required if the property:

• Is a dwelling
• Is in the UK
• Is valued at more than a specific threshold

Inheritance Tax

Inheritance tax is a levy placed on the property, money and possessions of a person who has passed away.  Upon, death, an IHT account must be submitted to HMRC that identifies all appropriate property and its value.

How do we value for taxation purposes?

Taxation Valuations provided are reviewed by valuers at the Valuation Office Agency on behalf of HMRC. Any valuation used for tax calculations must be prepared on a statutory basis in accordance with ‘best practice and the case law’.

Valuers must have a clear understanding of the basis of Market Value for taxation purposes. We must understand the background and purpose of a valuation before we proceed.

The definition of Market Value for tax purposes, is not exactly the same as the usual definition of Market Value.  Market Value for this purpose is broadly defined as:

“The price which the property might reasonably be expected to fetch if sold in the open    market at that time, but that price must be assumed to be reduced on the grounds that the whole property is to be placed on the market at one and the same time.”

For taxation valuations, the following assumptions are made by the valuer:

• The sale is hypothetical.
• The vendor is hypothetical, prudent, and willing to the transaction.
• The purchaser is hypothetical, prudent, and willing to the transaction.
• The asset would achieve the best overall price.
• All preliminary arrangements necessary for the sale have taken place prior to valuation.
• The property is marketed by whichever method of sale will achieve the best price – we do not need to state what method this is.
• There is adequate marketing of the property.
• The valuation should reflect the price of any “special purchase” within the report.

Avery & Co Surveyors and Valuers are specialists in the valuation of residential property. If you require a RICS valuation for tax purposes, please get in touch!

Contact us here or speak to one of our friendly team on  0330 088 5040