Capital gains tax query

nodosh3

I read in the newspaper recently that the law on capital gains tax is changing and I am not sure if and how this affects me.

My husband and I have owned and lived in our flat for 4 years. It has been for sale since April with no interest. We had found a property we wanted to move to and if we did not secure it we would have lost it, so we used everything we had to buy it, so we now own two properties - the flat we are still living in and the empt property that we want to move to. We had to pay additional tax for purchasing a second home which we understand we can reclaim if we sell our flat with 3 years which we are trying to do.
Our estate agent tells us the market for flats is slow in our area and we are likely to sit on the market for a while, so we plan to move in to the house within the next few months if we do not get a buyer for the flat.
This is where we are a bit unsure as to what financially would be best for us.

If and when the flat sells if we leave it empty do we have to pay capital gains tax?
If we decide to rent out the flat while leaving it on the market, would we still have to pay capital gains tax if and when it sells?
If it does not sell within 3 years (and some here have been on the market for 2 years so it is a possibility) would we lose the additional tax we have already paid for purchasing a second home?

What we are trying to work out is if it is worth reducing the price to cover the costs of potentially losing the tax we have already paid and capital gains tax, because to offset these costs against rent gained may take us years to even be in profit. We do not want to be landlords, we want to sell, but are trying to work out the best way financially to do this, and the tax laws are complicated.

Any advice would be appreciated.

Pennywise

Highly unlikely you'd have CGT to pay if you sold it within a couple of years. It's on the "profit" over the time you've owned it, the final few months are exempt and you also get your £12k annual CGT exemption, so you'd have to have made at least £12k each profit on it (assuming jointly owned) before there's a taxable gain at all, and then it's time apportioned with the period in which you live in it being exempt, so if you lived in it half the full period, half the gain would be exempt anyway.

It all depends on whether you'll make a profit and how much. So, unless it's risen a lot in value, highly unlikely you'll have CGT, even less likely if you have to reduce it to sell.

The stamp duty on a second property is a different matter - no you won't get that back if you see too late, so it's well worth reducing the asking price by the extra stamp duty you've paid and can get refunded on a sale within the timescales.