How to Avoid Capital Gains Tax on Cryptocurrency in the UK

While not introducing many drastic changes, for many crypto lovers this was another sign of the tax body’s growing interest in the financial area. We maintain a how to avoid crypto taxes uk mixed portfolio of clients ranging from start-ups to £50M. We also provide private client and tax planning services to companies and high net worth individuals.

For example, suppose you purchase an asset for £14,000 with Bitcoins which you bought for £10,000. Unless the money made on Bitcoins (£4,000) is under your tax-free allowance of £12,300, you must pay either 10% or 20% Capital Gains Tax , depending on the level of your taxable income. You might need to pay other taxes if you receive cryptoassets.

Leveraging deductible costs

What is clear is that you must pay tax on cryptocurrency in respect of any gains that are made on cryptocurrency funded investments. If you rely on the trading allowance and the miscellaneous or trading income that you earn through cryptoassets https://xcritical.com/ is no more than £1,000 per tax year, you should keep records to show this is the case. This would include your transaction history, the market values of the cryptoassets in pounds sterling at the relevant dates, and relevant calculations.

From a tax perspective, crypto assets are treated like shares and will be taxed accordingly. You can offset them against your capital gains to reduce your overall tax liability, which includes using them to bring you back within your tax-free CGT allowance. Better still, if you’ve only got losses, you can carry them forward to offset against gains in future financial years, provided you register them with HMRC.

Are taxes higher in the UK or US

But, before you exhale a sigh of relief, keep in mind that just because HMRC hasn’t mentioned the cryptocurrency exchange you use doesn’t mean they haven’t contacted them. Fortunately, you won’t always pay tax on your crypto in the UK. You calculate CGT by comparing the price and which you bought the asset to the price at which you dispose of it. Subtract the value at which you bought the asset from the value at disposal, and the difference is the gain upon which you will have to calculate how much CGT you are liable for. Since the launch of the so-called “Genesis Block “of Bitcoin in January 2009, cryptocurrencies have become an accepted currency in many countries the world over, including the UK.

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