With the UK property market being what it is there’s a good chance that if you sell a property you purchased some years ago – particularly if you’re located in certain property hotspots around the country – then you’ll be making a large profit on the transaction. What mustn’t be forgotten, however, is that you may well be liable to pay tax on the gains that you’ve made, in the form of capital gains tax. In most cases of this kind, given the possible sums of money involved, there’s a good chance that you’ll want to work with an accountant in order to ensure that your tax obligations are calculated correctly, but any accountant you work with will find their job is easier to do if you already sought out a capital gains tax valuation.

What is a capital gains tax valuation?

A capital gains tax valuation will be most useful if you have it provided to you, and any accountant you employ, before the sale of your property actually goes through. By working with a RICS qualified surveyor such as those employed by Crown Survey and Valuation you can be certain that the capital gains tax valuation you work with is completely accurate. That’s because our surveyors all work within the strict guidelines set out by the Royal Institute of Chartered Surveyors and with full knowledge of tax law as it applies to property and capital gains.

In addition to this technical know-how, our RICS qualified surveyors will bring with them an in-depth knowledge of the local property market around your property and the wider market in the rest of the UK.  A capital gains tax valuation sought out when you consider selling a property will enable you to forward plan your financial affairs safe in the knowledge of how much tax you’re ultimately likely to have to pay.

When do you have to pay capital gains tax?

In simple terms, you are legally obliged to pay capital gains tax on any property which you ‘dispose of’, if the value of that property has increased over time. The amount of tax you’ll have to pay will be determined by the profit you make from the sale of your property, rather than by its current market value. If you purchase a home for £250,000 for example, and sell it for £500,000 then you’ll have to pay tax on the profit of £250,000. Although the capital gains tax owed is determined by the gains made on the property, your accountant will also advise you with regard to any other factors which might impact on the amount, such as your taxable income and any tax reliefs you might be entitled to.

In this context, ‘disposing’ or a property could mean any of the following:

• Selling the property.
  
• Giving it to another person as a gift.
  
• Trading the property for another asset.
  
• Earning compensation on the property from things such as insurance payouts.

In general terms, if you are a higher rate taxpayer then you’ll have to pay 28% tax on the gains made from selling any residential properties. Clearly, once you’ve sold your property it should be fairly straightforward to calculate the capital gains tax which is owed. At this point in the proceedings, however, it’s a little bit too late to discover that you owe a lot more tax than you’d been planning for, which is why a capital gains tax valuation before selling could help you to plan exactly what you’re going to do, and when – if at all – you want to dispose of a property.

The exact rules around capital gains tax vary depending upon the circumstances. If you sell a property at market value for your own benefit then the tax charged is based upon the value of the property when it was sold. If a property is gifted the capital gains tax will be based on the value when it was gifted. If the property was originally purchased prior to 1982 then the amount of capital gains tax due will be based on the profit generated on the value of the asset on March 31^st 1982. Finally, if the property is inherited, any capital gains tax is calculated on the market value of the property when the benefactor dies. 

Clearly, in this situation, an accurate and independent market valuation will enable you to plan your tax affairs in advance. When producing a capital gains tax valuation of this kind, a RICS qualified surveyor will undertake a visual inspection of the property and base their valuation on aspects such as:

• Location – The location of the property can increase the market value of a property, particularly if it is close to a highly sought after school or within easy reach of convenient transport hubs.
  
• Description – Factors such as the year in which the property was built and the number of storeys it has will be noted, as will the way in which it has been maintained over the years.
  
• Type – the type of property will have a huge bearing, such as whether it is a flat or house, and whether a house is detached, semi-detached or part of a terrace. The size of the property will also be a factor. For survey and valuation purposes, the surveyor will use the RICS standard code of practice when noting the measurements for a property. Under this code the Gross Internal Area (GIA) measured is used for a flat, and the Gross External Area (GEA) measured is used for a house. In addition, the number of bedrooms and bathrooms will be taken into account.
  
• Utilities – the presence of expected utilities, such as gas, electricity and water, will be noted, although not the degree to which these utilities function or perform.
  
• Condition – the overall condition and state of repair of the property will be noted. In particular, whether structural features have been kept in good repair and whether any structural damage through neglect has taken place.
  
• Tenure – the valuation of the property for capital gains tax purposes will also be based on whether it is a freehold or leasehold property, with the former generally being worth more than the latter. A surveyor will also check the title deeds to see if there are any restrictions, such as restrictive covenants in place, as these could impact on the market value of the property. 
  
• Market factors – the market value of the property will ultimately be calculated by combining the particulars of that property with the housing market in the local vicinity and the value of similar properties. In addition, the surveyor will look at wider housing market conditions which could impact on the value of the property during the three month period within which such a valuation is valid. 

If you’re in need of a Capital Gains Tax Valuation for your property and are looking for an RICS Surveyor near you, contact us today for a free quote. We specialise in capital gains tax valuations and can carry out a professional inspection, so you can rest assured that the capital gains tax valuation we arrive at is a realistic reflection of the current value of your property.