HMRC ask for property valuations because property is often the largest and most subjective asset people own. Unlike cash in a bank account, a house or flat doesn’t come with an obvious “official price tag”. Two people can look at the same property and reach very different numbers, especially if condition, lease terms, or local market changes are involved.
So when a tax return or estate submission includes property, HMRC need a valuation to ensure:
- the right amount of tax is paid,
- valuations are consistent across taxpayers, and
- there is an evidence trail if figures are queried later.
In short:
HMRC need property valuations to calculate tax fairly and accurately, and to check that values declared are reasonable and supportable.
1) Property values are central to how certain taxes are calculated
A property valuation is often needed because tax is calculated on the value of the asset (or the change in value), not just on what someone “thinks it’s worth”.
Common situations include:
A) Inheritance Tax (IHT)
When someone dies, property may form a large part of the estate. HMRC need a value at the date of death so the estate can be assessed correctly for IHT reporting and liability.
B) Capital Gains Tax (CGT)
When a property is sold or transferred, HMRC may need to know:
- what it was worth when acquired or at a relevant historic date, and
- what it was worth when disposed of,
so the gain can be calculated accurately.
C) Gifts and transfers
Even if no money changes hands, tax can still depend on the property’s value at the transfer date.
D) Trusts and business ownership
Property held in trusts or business structures can trigger reporting needs where values must be evidenced.
The consistent theme: the valuation date and the declared value can materially affect the tax due.
2) Property is subjective, so evidence matters
Unlike shares (with a visible market price), property value depends on many variables:
- location and micro-location
- size, layout, and natural light
- condition, repairs needed, defects, and risk
- tenure and legal position (especially leasehold)
- service charges, ground rent, major works (for flats)
- buyer demand and mortgage affordability at the relevant time
Because it’s subjective, HMRC need a valuation that is:
- anchored to evidence (usually comparable sales), and
- specific to the relevant date.
3) HMRC’s job is to ensure the value declared is “reasonable”
HMRC do not ask for valuations because they expect everyone to be wrong. They ask because they must ensure that:
- values declared are not artificially low (reducing tax), or
- artificially high (sometimes done inadvertently, or creating unfairness between parties), and
- similar assets are treated consistently.
A valuation is the way to show that the figure you’ve submitted is based on:
- market evidence,
- a clear methodology, and
- transparent assumptions.
4) Valuations help HMRC assess risk and decide whether to query a figure
HMRC receive a huge number of submissions. They often focus attention where something looks unusual, such as:
- a value that appears out of line with comparable local sales
- a high-value property with a surprisingly low declared value
- significant changes between the declared value and a later sale price
- properties with development potential where value could be higher
- unusual properties where value is harder to judge
A well-supported valuation reduces the chance of misunderstandings and can make any future query easier to resolve.
5) Retrospective valuations are a major reason HMRC need proper evidence
A large proportion of HMRC-related valuations are retrospective—for example, a probate valuation as at the date of death.
Retrospective valuations can be challenging because:
- the property may have changed since the valuation date
- the market may have moved
- evidence of condition at that date may be limited
That’s why HMRC value clear documentation and reasoning. If the valuation explains:
- what the property was like at the date, and
- what comparable evidence supports the number,
it is far easier to defend.
6) Leasehold flats: another key reason valuations matter
Flats can vary hugely in value based on legal and running-cost factors that HMRC (and buyers) consider material, such as:
- lease length at the valuation date
- ground rent terms and review pattern
- service charge level
- planned major works
- building condition and management issues
A valuation that ignores these can look unreliable. HMRC need figures that reflect the reality of the market for that specific flat at that time.
7) What makes a valuation useful from HMRC’s perspective?
HMRC generally want a valuation that is:
- clear on the valuation date and purpose
- based on appropriate comparable evidence
- realistic about condition and defects
- transparent about assumptions and limitations
- consistent with how a buyer would behave in the market
It doesn’t need to be overly complicated—but it does need to be defensible.
8) Common misconceptions
“HMRC want an exact number”
Valuation is an opinion, not a guaranteed sale price. HMRC generally want a reasonable, evidence-based figure, not a perfect prediction.
“Online estimates are enough”
Online tools rarely account properly for condition, lease details, or historic dates. They can be useful for a rough guide, but are often not robust enough where tax scrutiny is possible.
“If it sold later for more, the earlier valuation was wrong”
Not necessarily. Markets move and properties change. A well-evidenced valuation explains the figure at the relevant date.
The takeaway
HMRC need a property valuation because property value affects tax calculations and property does not have a simple, fixed “price”. A valuation provides the evidence HMRC need to assess whether the value declared is reasonable, consistent, and properly supported—especially where the valuation date is in the past or where the property is unusual or leasehold.
Need a property valuation for HMRC or tax reporting?
Email mail@howorth.uk or call 07794 400 212. Tell us the property type and location, the tax purpose (IHT, CGT, transfer, trust, etc.), and the valuation date you need. If it’s retrospective, any dated photos, surveys, or lease details (for flats) will help us produce a clear, evidence-based valuation you can rely on.