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Beware CGT!!! UK tax on BTC even when you think it doesn’t apply to you!!! (Reddit Bitcoin)

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UK specific post – although the essence might be relevant for other markets. I recently became aware that HMRC views cryptocurrencies as a taxable item, that mainly attracts Capital Gains Tax. This may be commonly known on here, but I had done some prior research before starting to stack and was fairly confident in my mind that it was treated similarly to a currency & therefore that, when it’s your personal money, you wouldn’t get taxed on it. So a slight bummer and better research needed – but glad I’m still trying to learn and read. With this new found knowledge, I was still fairly satisfied with the impact on me – as I would only be liable for CGT when I disposed of the coins. My plan is to hold until it becomes a currency – so this is not really an issue. At worse it’s a 20% tax on something that avoids holding a mass inflation of GBP in this time. Reading into the HMRC paper though, they are counting a disposal of BTC (for example) not only when you sell for FIAT and ‘realise the gains’, but also if you buy another cryptocurrency with your BTC. I hold an equal amount of another coin and have grown these on a 50/50 basis (I view that it is likely to be the $ to BTC’s gold position in the market and so both sides could end up being good calls (or both bad :shrug:)). The second coin I can’t buy in GBP using the platform I purchase through, so have merrily been buying BTC and immediately using the BTC/Othercoin market to trade it across. Slightly more fees, than buying direct, but for my own sanity, I was happy with this. Now in the normal world, this shouldn’t be an issue as ‘1’ BTC held for a short time then used to purchase another coin of the same FIAT value hasn’t gained any value – so no CGT would be recognised. BUT… HMRC are pooling the value of BTC you hold. So the outcome from dollar averaging. This means that although I buy ‘1’ BTC at a cost of £8k to swap it for ‘1’ other coin, if my dollar cost average position is £6k, then I am realising £2k of profit from this trade – meaning that it attracts £400 worth of tax liability. This is obviously a huge impact on something that was a simple ‘lazy’ step around having to use two exchanges to buy the two different coins, but I am sure that I am not the only one – especially when the exchange I use has ABSOLUTELY NO INFORMATION on the BTC/other currency markets to suggest that it attracts on this basis. Am I the only one who has fallen into this hole? Am I reading this wrong? Original source documentation from HMRC is here: https://www.gov.uk/government/publications/tax-on-cryptoassets/cryptoassets-for-individuals
submitted by /u/habitualpotatoes [link] [comments]

UK specific post – although the essence might be relevant for other markets.

I recently became aware that HMRC views cryptocurrencies as a taxable item, that mainly attracts Capital Gains Tax. This may be commonly known on here, but I had done some prior research before starting to stack and was fairly confident in my mind that it was treated similarly to a currency & therefore that, when it’s your personal money, you wouldn’t get taxed on it. So a slight bummer and better research needed – but glad I’m still trying to learn and read.

With this new found knowledge, I was still fairly satisfied with the impact on me – as I would only be liable for CGT when I disposed of the coins. My plan is to hold until it becomes a currency – so this is not really an issue. At worse it’s a 20% tax on something that avoids holding a mass inflation of GBP in this time.

Reading into the HMRC paper though, they are counting a disposal of BTC (for example) not only when you sell for FIAT and ‘realise the gains’, but also if you buy another cryptocurrency with your BTC.

I hold an equal amount of another coin and have grown these on a 50/50 basis (I view that it is likely to be the $ to BTC’s gold position in the market and so both sides could end up being good calls (or both bad :shrug:)). The second coin I can’t buy in GBP using the platform I purchase through, so have merrily been buying BTC and immediately using the BTC/Othercoin market to trade it across. Slightly more fees, than buying direct, but for my own sanity, I was happy with this.

Now in the normal world, this shouldn’t be an issue as ‘1’ BTC held for a short time then used to purchase another coin of the same FIAT value hasn’t gained any value – so no CGT would be recognised.

BUT… HMRC are pooling the value of BTC you hold. So the outcome from dollar averaging. This means that although I buy ‘1’ BTC at a cost of £8k to swap it for ‘1’ other coin, if my dollar cost average position is £6k, then I am realising £2k of profit from this trade – meaning that it attracts £400 worth of tax liability.

This is obviously a huge impact on something that was a simple ‘lazy’ step around having to use two exchanges to buy the two different coins, but I am sure that I am not the only one – especially when the exchange I use has ABSOLUTELY NO INFORMATION on the BTC/other currency markets to suggest that it attracts on this basis.

Am I the only one who has fallen into this hole? Am I reading this wrong? Original source documentation from HMRC is here: https://www.gov.uk/government/publications/tax-on-cryptoassets/cryptoassets-for-individuals

submitted by /u/habitualpotatoes
[link] [comments],

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