fbpx

CGT and cryptocurrency

Author

Andy Wood

Andy is a practical, creative tax adviser who assists a variety of clients in achieving their personal and commercial objectives in the most tax efficient manner.

  • As stated in one of our other video blogs, the tax treatment of crypto depends on your activity rather than the fact that you are dealing in crypto per se.
  • It is the nature of that activity that will determine whether you will be subject to Capital Gains tax or Income tax.
  • Of course, if you are operating through a company then you will be subject to Corporation tax regardless of whether it is of an income or capital nature.
  • As stated, there are no special rules for cryptocurrency.
  • There are essentially three capital gains tax shoots that a holder of crypto might slide down.
  • Firstly, where the crypto is held for personal use and expenditure
  • In principle, it seemed under HMRC’s 2014 guidancethat where a cryptocurrency was acquired for personal use, its disposal could ultimately be free of tax.
  • However, HMRC has feverishly rowed back from this position in more recent guidance!
  • Secondly, where the crypto holding was acquired speculatively
  • Again, earlier HMRC guidance also raised the possibility that transactions might be so speculative that they are not taxable. But once again, HMRC has rowed back from this position.
  • Finally, and most commonly, the holding will be considered to be acquired be acquired as an Investment with the profits being subject to Capital Gains regime.
  • Here, gains will be subject to CGT at either 10% or 20% depending on the level of other income earned by the taxpayer in the year.
  • They should generally get the Annual Exemption that applies for the relevant year.
  • Companies, of course, would be subject to corporation tax at 19%.
  • In terms of timing, gains or losses will arise in a number of different circumstances
  • Clearly, where one converts crypto into fiat currency – for example, Bitcoin in to sterling or dollars.
  • It will also be a disposal where one converts of one type of cryptocurrency in to another one eg Bitcoin into Ethereum
  • Finally, the other relevant time might be where one participates in an Initial Coin Offering or ICO or other event.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

By continuing to use the site, you agree to the use of cookies. more information

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.

Close