UK Tax Optimisation when Swapping Tokens

I am trying to understand the tax implication (taking into account UK cost basis and Bed/Breakfast Rules)

Here is the example I am trying to understand

  • I bought 10 ETH at price of £1700 per ETH (total £17K)
  • Sometime later (more than 30 days) ETH price is £2000 per ETH (total £20K).
  • I swap from ETH to BTC (imagine this means I got a full BTC for simplicity). This is a taxable event and it would mean I have £3000 Capital Gain which is subject to CG rules, as far as I know.
  • Less than 30 days, I swap one BTC back to ETH but at this swap I got 11 ETH instead of 10.

Does this mean I will be taxed on both swaps or it means I just bought 11 ETH with £17000? or it means the extra ETH I got will be considered a gain and I will need to pay tax for its price at the time of the swap?

Thank you

no it doesn’t mean you just bought 11 ETH with £17000

The answer to your question would depends on what BTC was worth when you swap the 1 BTC to 11 ETH? If you assumed the BTC was still worth £20000 when swapped for 11 ETH (£1818.18 each).

assumed following transactions:

Buy/Sell Date Coin Qty Price
B 10-Apr-21 ETH 10 1700.0000000
S 20-May-21 ETH 10 2000.0000000
B 20-May-21 BTC 1 20000.0000000
S 30-May-21 BTC 1 20000.0000000
B 30-May-21 ETH 11 1818.1800000

Capital gains calculation is below;

TAX_YEAR 21-22

  1. SELL: 10 ETH on 20/05/2021 at £2000.00 gives GAIN of £1,818.20
    Matches with:
    BUY: 30/05/2021 10 ETH shares of 11 bought at £1818.18
    CALCULATION: Gain = £1,818.20 = ( 10 * 2000.00 - 0.00 )
  • ( 11 * 1818.18 + 0.00 + 0.00 ) * ( 10 / 11 )
  1. SELL: 1 BTC on 30/05/2021 at £20000.00 gives GAIN of £0.00
    Matches with:
    BUY: SECTION 104 HOLDING. 1 BTC shares of 1 bought at average price of £20000.00
    CALCULATION: Gain = £0.00 = ( 1 * 20000.00 - 0.00 )
  • ( 1 * 20000.00 )

CURRENT PORTFOLIO

ETH 11

Total number of trades = 5
Total number of buys = 3
Total number of sells = 2

INFO FOR TAX RETURN

21-22: Disposal Proceeds = £40,000.00 , Allowable Costs = £38,182.00 , Disposals = 2
21-22: Year Gains = £1,818.00 Year Losses = £0.00

1 Like

Adam, that’s the most comprehensive and clear answer I got so far! thank you so much! I really appreciate it!