worried and confused , I basically said in that comment, I had invested £6k into crypto , I have a gain of £8k, I bought a plan with Koinly a tax calculator and it’s saying capital gains is £2000 but minus the losses it’s down to £690, now where I’m confused is I’m under the capital tax free allowance of 12.3k does that mean I’m ok ? Or because I’ve disposed assets along the way 1400 + transactions of exchanging crypto to other crypto or purchasing good what situation does that leave me in. Does that change everything can someone please explain in depth to me it’s soo confusing .
My understanding of capital gains is that if you invest 6k and “withdraw” 8k then you wouldn’t pay capital gains unless it goes over 12.3k
Few things to consider… First to pay capital gains you have to dispose of the asset - as far as im aware this mean that you would have to sell the crypto and withdraw in into your bank account in order for it to be a “gain”. Just having it say in a wallet doesn’t count as a gain (until you sell it) as there is no tax on “buying” and “holding” crypto.
The bit im a little unsure about is if you use profits to buy more coins… I would guess it works something like…
I buy £6k in coin A
I sell coinA for £8K - I get £2k profit
I reinvest £8k in coinB
I then sell coinB for £10k - I get another £2k profit
£6k would be the initial investment - Not subject to capital gains.
£4k would not be subject to capital gains as this amount “gained” is less than the allowance (currently, i heard the allowance might change soon)…
I then reinvest £10k in coinC which triples in value
So I then sell coinC for £30k - Making £20k profit
£6k would be the initial investment - Not subject to capital gains.
£12300 would be the allowance - Not subject to capital gains.
The remaining £11,700 would then be subject to capital gains… as this would be the “gain” above the initial investment and the gain allowance of £12.3k.
However… If you were to make a trade (lets say you converted £30k BTC to ETH) and the price crashed leaving you with a loss of £5000 … this loss would then be deducted from capital gains.
So taking the example above, if you had the £11700 taxable gain and lost £5k, your total taxable gain would then be £6700.
Profit - Loss - Initial investment - capital gains allowance = X – using the example above this would be
30000 - 5000 - 6000 - 12300 = 6700
I’m not a financial advisor, that’s just my view / understanding
Ref: Cryptoassets: tax for individuals - GOV.UK
Hope it helps
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Crypto to crypto transactions are taxable events in the UK, so you are potentially liable to CGT if you go over the allowance regardless of whether you withdraw into fiat. This is a minefield which is going to cause a lot of grief after April this year I think - some will need to sell into fiat just to pay a bill on gains they don’t feel they have realised, but the tax man says they have. I agree with you, a raid on the CGT allowance is a likely move to pay for the virus, especially since hundreds of thousands of people are suddenly sitting on crypto gains due to the bull run.
We’re never allowed nice things.
Thanks so much , for the time and effort explaining all of that , has definitely made me understand much more better now , yeah I’ve noticed the part where losses help negate the capital gain tax , im at currently £640 capital tax gain , I use an app called crypto.com it’s a debit visa card too , so like has a separate part for topping up and spending and selling crypto to use as expenditure, but from now understanding all this stuff , I plan to stop and Hodl, and I will need to see an accountant to have a proper understanding. I rather know now what I’m getting into than later ,
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