Hi. My name is*****'m looking at your question now and will post my answer or ask for more information here in a short while.
Mortgages and values of property when it ls let or when you move out are irrelevant as far as calculating a capital gain is concerned. It's more straightforward than that.
If you sell the first property for £455,000, you will make a gain of £347,000 (£455,000 - £222,000 - £125,000). That part of the gain covered by your occupation of the property will be tax free as will the gain for a maximum of the last 18 months of ownership when you weren't living there. So, based on what you told me, if you sold the property in November 2016, only about 6 months of the gain (June 2016 to November 2016) would not be covered by exemptions but it would probably be covered by letting relief. Take a look at Example 9 in HS283 here. HMRC may ask to see receipts and invoices for the improvement work. Photographic evidence may help.
I hope this helps but let me know if you have any further questions.
I do apologise. The gain will be £108,000. For some reason i took your figure of £347,000 even though I typed the three relevant figures in brackets.
The gain is spread out over the entire period of ownership as Example 9 in HS283 clearly shows. I usually divide the gain into complete months and in your case there will a taxable gain for 6 months if you sell by November 2016. That will probably be covered by letting relief so you should have no taxable gain. Even if you did have a taxable gain after deducting letting relief, the first £11,100 will be tax free due to the annual CGT exemption.