Traders who have sold or exchanged cryptocurrency may be required to pay Capital Gains Tax (CGT), HM Revenue & Customs (HMRC) has warned. It comes after the tax authority wrote to holders of cryptoassets, such as Bitcoin, reminding them of their legal obligations. According to the letter, you must pay CGT if your total gains
Traders who have sold or exchanged cryptocurrency may be required to pay Capital Gains Tax (CGT), HM Revenue & Customs (HMRC) has warned.
It comes after the tax authority wrote to holders of cryptoassets, such as Bitcoin, reminding them of their legal obligations.
According to the letter, you must pay CGT if your total gains arising from all disposals in a tax year are over the annual exempt amount – currently £12,300. The allowance is not exclusive to cryptocurrency, meaning it is shared across all other assets, such as shares in a company or property.
A “disposal” is defined as the sale of cryptoassets for fiat currency, such as pounds or dollars; the exchange of one cryptoasset for another, such as the conversion of Bitcoin to Ether; or using cryptoassets to buy goods or services.
For CGT purposes, the gain is usually the difference between what you paid for an asset and what you sold it for or the value at exchange.
Losses, however, can be used to reduce the CGT due on other gains.
HMRC advises holders of cryptoassets to review their transactions, calculate their gains and/or losses, and complete a Self Assessment tax return if necessary.
If gains were made in previous tax years, the trader should complete a disclosure using the Digital Disclosure Service.
Click here to read the letter.
