A single rental property portfolio does not have one value for tax. It has several. The figure HMRC wants when you sell is not the figure your company accounts report at the year end, which is not the figure your executors use on death, which is not always the figure that matters when you move the portfolio into a company. Each tax event has its own statutory valuation basis, applied at its own date. Getting the wrong value, or the right value at the wrong date, is one of the most common and most expensive mistakes landlords make.
This guide is the cross-walk. It sets out which value you need, for which tax, at which moment, with the statute behind each one and a worked example for the events that catch landlords out. Where a single event needs deeper treatment, we link to the page that covers it in full.
Which value, for which tax, at which moment
Most tax events fall into one of five valuation situations. The underlying open-market test is similar across capital gains tax and inheritance tax, but it is applied at different dates and sits alongside a separate fair-value rule for company accounts. Start here, then read the section that matches your event.
| Tax event | Valuation basis | Statutory hook | Who needs it |
|---|---|---|---|
| Selling a property (CGT) | Open-market value | TCGA 1992 s.272 | Any landlord disposing of a property |
| Transfer to a connected person (CGT) | Deemed market value, whatever the price paid | TCGA 1992 s.17 | Gifting or transferring below market value |
| Company year-end accounts | FRS 102 Section 16 fair value (or FRS 105 historic cost) | FRS 102 Section 16 / FRS 105 | Limited companies and LLPs holding property |
| Death (IHT and CGT base cost) | Open-market value at date of death | IHTA 1984 s.160; CGT uplift TCGA 1992 s.62 | Executors and heirs |
| Incorporation | Market value at the date of transfer | TCGA 1992 s.162 and s.17 | Landlords moving a portfolio into a company |
For a broader view of how these events sit within your overall position, see our complete guide to property investment tax in the UK.
What "market value" actually means
Three of the five events above turn on the same idea: open-market value. For capital gains tax, TCGA 1992 s.272 defines market value as the price the assets "might reasonably be expected to fetch on a sale in the open market". For inheritance tax, IHTA 1984 s.160 uses almost identical wording, the price the property "might reasonably be expected to fetch if sold in the open market at that time". In both cases the test assumes a willing buyer and a willing seller, neither under compulsion, and a property fully exposed to the market.
Because the statutory test is the same, the difference between events is the date and the purpose, not the method. Valuing a rental property therefore comes down to evidencing that open-market figure at the right moment. Surveyors typically use one or more of three approaches:
- Comparable sales. Recent sales of similar properties in the same area. This is the standard method for residential property and the one HMRC expects to see for most buy-to-lets.
- Income capitalisation. Valuing the property from its rental income using a market-derived yield. More common for larger portfolios, commercial property, and HMOs let on a room-by-room basis.
- Replacement cost. Used only where comparables are scarce, for example an unusual or specialist building.
An automated portal estimate is not a valuation. HMRC can and does challenge unsupported figures, particularly for incorporation, inheritance, and connected-party transfers where there is no real sale price to anchor on. For more on the difference between an agent's appraisal and a formal valuation, see our guide to a free rental valuation and when you need a RICS valuation.
CGT: valuing a property you are selling
When you sell, the gain is the disposal proceeds less your allowable cost. The allowable cost is normally what you paid, plus capital improvements (extensions or upgrades that add value, not repairs), plus acquisition and disposal costs such as legal fees and stamp duty land tax on purchase. If you inherited the property, your base cost is its market value at the date of death (see below).
Capital gains tax on UK residential property is charged at 18% for gains within your basic-rate band and 24% above it, with an annual exempt amount of 3,000 pounds for individuals. A company instead pays corporation tax on its chargeable gains at the prevailing rate. For the full rules, rates, and reporting deadlines see our complete guide to capital gains tax on property.
Worked example 1: selling part of a portfolio as a lot
A higher-rate landlord sells three flats to a single buyer for 900,000 pounds as one lot. The buyer is paying for a ready-made block, so the lot price is slightly below the 945,000 pounds the flats would fetch sold individually. For CGT the landlord cannot use a single global figure. The 900,000 pounds is apportioned across the three flats by relative market value, giving each its own proceeds figure, which is then set against that flat's own base cost. Each flat produces a separate gain. The annual exempt amount of 3,000 pounds is applied once across the total, and the net gain is taxed at 18% within the remaining basic-rate band and 24% above it.
CGT: transfers to family or into your own company
This is where valuation matters most and is most often misunderstood. A transfer to a connected person, an adult child, a sibling, a business partner, or your own company, is not a bargain at arm's length. TCGA 1992 s.17 deems the disposal to take place at the open-market value of the property, whatever actually changes hands. Selling a flat to your son for a token amount, or transferring at the original purchase price, does not avoid the gain, the CGT is computed on full market value at the date of transfer.
The main exception is a transfer between spouses or civil partners living together, which is treated as no gain, no loss, so the receiving spouse inherits the original base cost. For a deeper treatment of undervalue and below-market transfers, see our guide to selling or transferring a property below market value.
Worked example 2: gifting a flat to an adult child
A parent gives a buy-to-let flat to their adult daughter for nothing. The flat cost 150,000 pounds and is worth 280,000 pounds at the date of the gift. Even though no money changes hands, s.17 deems the disposal at the 280,000 pounds market value, so the parent has a chargeable gain of around 130,000 pounds (before costs and the annual exempt amount) and a CGT bill to settle, with no cash from the transaction to pay it. There is no holdover relief for an ordinary investment let, so the gain crystallises immediately. The daughter takes 280,000 pounds as her base cost for any future sale.
FRS 102 company accounts: fair value at the year end
If you hold rental property through a limited company, the year-end accounts are governed by FRS 102. Under Section 16, investment property (property held to earn rent or for capital appreciation) is measured initially at cost and then at fair value at each balance sheet date, with movements recognised in profit or loss. Investment property is not depreciated. The FRS 102 periodic review took effect for accounting periods beginning on or after 1 January 2026, but it did not remove the investment property fair value model, which remains the standard treatment.
The catch is deferred tax. Fair value gains hit the company's reported profit even though no property has been sold and no corporation tax is due yet, because gains are only taxed on disposal. FRS 102 Section 29 requires the company to recognise deferred tax on that timing difference, measured at the tax rate expected when the gain is realised. Two practical consequences follow:
- Reported profit can be large in a rising market while the actual tax due that year is small, the deferred-tax provision bridges the gap.
- Unrealised fair value gains are not distributable. You cannot pay a dividend out of a revaluation gain that has not been realised in cash.
FRS 105 and the LLP contrast
FRS 102 is not the only option. A company that qualifies as a micro-entity may apply FRS 105 instead, which holds investment property at historic cost with no revaluation, and prohibits deferred tax altogether. That is far simpler to prepare, but the balance sheet never reflects the property's current value and there is no fair-value uplift to show lenders. For a one or two property company, FRS 105 is often the cleaner choice, the trade-off is visibility versus simplicity.
An LLP sits differently again. An LLP that holds investment property commonly elects the FRS 102 Section 16 fair value model, but because an LLP is tax-transparent (the members are taxed, not the LLP), there is no LLP-level deferred tax on those fair value gains. That removes the Section 29 overhead a limited company carries and gives a cleaner presentation. The choice between a limited company, an LLP, and a micro-entity is therefore as much an accounting and deferred-tax decision as a tax-rate one. We cover the structures in our guides to limited companies and buy-to-let properties and property LLP accounts.
IHT: market value at the date of death
For inheritance tax, the portfolio is valued at its open-market value at the date of death (IHTA 1984 s.160). That figure decides whether the estate exceeds the nil-rate band of 325,000 pounds per individual and how much IHT is due. Gifts of property made within seven years of death are brought back into the estate at their market value at the date of the gift.
The crucial interaction with CGT is the base-cost uplift. There is no capital gains tax disposal on death, and the personal representatives are deemed to acquire the assets at their market value at the date of death (TCGA 1992 s.62). Lifetime gains are effectively wiped for CGT, and the heirs take the date-of-death value as their new base cost. For the full inheritance tax treatment of a rental estate, see our guide to inheritance tax on rental property.
Worked example 3: an inherited portfolio
A landlord dies owning four flats bought years ago for a total of 400,000 pounds, now worth 800,000 pounds. The executors value the flats at the 800,000 pounds date-of-death market value for the IHT account. There is no CGT on the death itself, the lifetime gain of 400,000 pounds is not taxed. The heir inherits the flats with a CGT base cost of 800,000 pounds, so if they later sell at, say, 830,000 pounds, the chargeable gain is only the 30,000 pounds that has accrued since the date of death, not the full historic gain.
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IHT: does Business Property Relief help landlords?
Most landlords hope Business Property Relief (BPR) will take the portfolio out of inheritance tax. For a standard buy-to-let it almost never does. The Upper Tribunal in Pawson v HMRC confirmed that ordinary letting is mainly an investment activity, which fails the test in IHTA 1984 s.105(3). A genuine trading operation with substantial additional services may qualify, but collecting rent does not make a business "mainly" trading.
Where APR or BPR does apply, note the change from 6 April 2026: a combined 100% relief allowance of 2.5 million pounds applies on a rolling seven-year basis (IHTA 1984 s.124D, inserted by Finance Act 2026), and above that allowance relief drops to 50%, an effective 20% IHT charge on the excess. For most pure buy-to-let estates this is academic because the relief is not available in the first place, but it matters for genuine trading property businesses.
Incorporation: market value at the date of transfer
Moving a portfolio into a company is a single moment that fixes several numbers at once. The transfer is a connected-party disposal at market value (TCGA 1992 s.17), so the CGT gain is computed on the full market value of each property at the date of transfer, not on the original cost. Incorporation relief (TCGA 1992 s.162) can defer that gain where the whole business is transferred to the company as a going concern wholly or partly in exchange for shares, with the deferred gain rolled into the base cost of the shares. The same transfer-date value also becomes the company's opening FRS 102 fair value and the figure SDLT is charged on. One valuation, several consequences. The incorporation process and reliefs are covered in our guide to incorporating a property portfolio and our complete guide to buy-to-let limited companies.
Worked example 4: incorporating a three-property portfolio
A landlord incorporates three properties worth 600,000 pounds in total, bought for 360,000 pounds. The transfer is deemed to take place at the 600,000 pounds market value (s.17), producing a 240,000 pounds gain. Where the conditions are met, s.162 incorporation relief can defer that gain by setting it against the base cost of the shares the landlord receives. The company opens its FRS 102 balance sheet at the 600,000 pounds fair value, and SDLT is calculated on the same 600,000 pounds. A weak or undated valuation here undermines all three figures, which is why the transfer-date valuation is the keystone of any incorporation.
Cash flow under the current finance-cost rules is often what drives the incorporation decision in the first place. For the mechanics of the mortgage interest restriction, see our guide to Section 24 and mortgage interest relief.
Getting a valuation HMRC will accept
Whatever the event, the practical defence is evidence. For anything significant, a sale, an incorporation, an inheritance, or a connected-party transfer, obtain a formal valuation from a RICS-qualified surveyor or an experienced local agent, dated to the exact date of the event. Keep the comparables, the rental evidence, and the lease information that support the figure. HMRC can challenge an unsupported estimate years after the event, and the cost of obtaining a professional valuation is generally an allowable cost. If you let property within ATED scope through a company, note that ATED has its own fixed five-yearly valuation dates, explained in our guide to the ATED valuation date.
Common valuation mistakes
- Using purchase price as current value. For CGT you need the value at the date of sale or transfer, for company accounts the fair value at the year end. The price you paid is rarely the figure you need.
- Ignoring the portfolio lot effect. Selling several properties together can mean a premium or a discount versus their individual values. Apportion the lot price by relative market value to get a correct per-property gain.
- Forgetting leasehold drag. A short lease or onerous ground rent reduces value materially. The valuation must reflect the actual lease terms, not a long-lease assumption.
- Overlooking Section 29 deferred tax. Companies must provide deferred tax on unrealised fair value gains. Miss it and your distributable reserves, and your dividend planning, are wrong.
- Treating a connected-party transfer as the price paid. The gain is on deemed market value under s.17, not on the token sum that changed hands.
For a full list of what is and is not allowable when you let property, see our complete list of landlord tax deductions, and for the relief that can apply where a property was once your home, our guide to Principal Private Residence Relief for landlords.
When to seek professional help
Portfolio valuation crosses tax, accounting, and surveying, and the cost of getting it wrong compounds across several taxes at once. If you are incorporating, planning your estate, transferring property within the family, or preparing company accounts that turn on a fair value, it is worth getting the valuation basis and the date right before you act rather than after HMRC asks. A property tax specialist works alongside your surveyor so the figure stands up across every return it feeds.
Final thoughts
There is no single value for a rental portfolio. There is a value for capital gains tax when you sell, a deemed value when you transfer to a connected person, a fair value for the company accounts, a date-of-death value for inheritance tax and the CGT uplift, and a transfer value at incorporation. Map your event to the right basis and the right date, evidence it properly, and the rest of your tax position follows cleanly. Where an event needs depth, follow the links above to the page that covers it in full, or explore our property tax services to see how we can help.