Hello Everyone,
I am based in the UK and I am looking for clarification with regards to taxation when margin trading with leverage on Binance (with BTC as the collateral).
With BTC being collateral and the result of the trading leading to either a profit or loss, I can see two tax implications here. Lets take an example where I gain 0.1 BTC from a trade with BTC valued at £50,000 on the day this is settled (and assume I am over the CGT allowance):
1.) The GBP value of the profit of the trade is £500 and I will have to pay CGT tax on this futures trade at 20% (£100).
2.) If I keep this 0.1 in BTC, I am effectively using the profit from the trade to “purchase” BTC, with the price of BTC on the day of the trade settlement acting as the cost basis.
First of all, are the above assumptions correct?
Secondly, I am worried of working up a large CGT bill from my margin trading gains and then keeping all of that profit in Bitcoin. This is because if Bitcoin then loses significant value, my holdings will decrease and I will still have to pay all of the tax from the margin trading.
Therefore, I was thinking, every week I could just work out my CGT liability and then liquidate the required amount of bitcoin to match that cost. Then I could just keep that fiat in a separate bank account ready for my tax bill.
Do this seem like a sensible idea?
Also just to add another point…I could send GBP to binance and convert to Tether and margin trade BTC with tether as the collateral. Then I could keep 20% tether gains for tax and convert the rest to BTC right?