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Capital Gains Tax: Do you need to declare cryptocurrency holdings or profits to HMRC? | Personal Finance | Finance

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Capital gains tax is a levy charged on the profit someone makes when they sell or gift something which has increased in value. But what are the rules when it comes to cryptocurrency such as bitcoin?


Britons who sell assets whose total taxable gains are above their annual capital gains tax allowance of £12,300, are required to pay CGT.

The levy for basic rate taxpayers is 10 percent, rising to 20 percent for higher-rate taxpayers.


However, as cryptocurrency and bitcoin are relatively new this could lead to some confusion as to whether Britons need to inform HM Revenue and Customs (HMRC).

James Carn, Associate Director of Private Client Tax Services at Tilney Smith & Williamson said it all depends on an individual’s gains and losses.

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In exceptional cases an individual could be subject to income tax instead of capital gains tax.


Mr Carn continued: “The tests to determine whether or not an individual is deemed to be ‘trading’ in an asset are complex and are based on the interaction of a number of factors, including the source of financing, the frequency of transactions, the method of acquisition and the interval of time between the purchase and sale of the asset.

“Trading losses can be offset against other income which is more attractive than the capital loss treatment.

“HMRC is, however, likely to challenge a taxpayer who reports a crypto-asset related loss as a trading loss because there is a high hurdle to clear in order to meet the trading criteria.”

People do not have to pay capital gains tax on transfers between spouses or civil partners or on most gifts to charity if the transfer is direct.

As well as the amount originally paid for the asset, other costs can be deducted when calculating the gain or loss, including transaction fees and valuation fees.

Crypto holdings are an asset that will form part of someone’s estate when they die and could result in the estate being above the IHT liability threshold.

HMRC has more information on its website and it’s a good idea to seek independent financial advice if people are still unsure.





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