Will my property incur capital gains tax?

Q We bought a property off-plan in July 2003 for £148,500, but when it was built I did not want to live in it. We have left the property empty and just paid the extra mortgage. We now realise that I will never move into it and want to sell. We have had it valued at £210,000. Would we pay capital gains tax and, if so, how much? Could we take into account all the interest paid on the mortgage during the last three years?
DX

A You cannot take into account the interest you have paid on the mortgage when calculating the taxable capital gain. But what you can include in the sums are the costs of buying and selling the property.

So to work out the taxable gain, take the sale price and deduct the price you paid; legal fees for buying and selling; land registry fees (and any other costs involved in transferring ownership of the property); estate agents' commission (if applicable); and the stamp duty you paid when you bought the property.

To work out if any capital gains tax is due after making those deductions, you first need to work out your share of the gain (assuming that you own the property jointly).

If your share of the gain is less than £8,800 (in the 2006-7 tax year), there will be no tax bill (assuming you have no other taxable gains). If your share of the gain is greater than £8,800, you will pay capital gains tax at a rate equal to your highest rate of income tax.

There is more detailed information on how capital gains tax is calculated in the free leaflet Capital Gains Tax: An Introduction from HM Revenue & Customs.