Business is booming.

Crypto winners cannot dodge the tax authorities

54


If anyone tells you crypto doesn’t matter to the average investor, think again. As many as one in three of my clients now holds crypto assets such as bitcoin. And the Financial Conduct Authority has put the overall number of crypto holders in the UK at no fewer than 2.3m.

Most of my clients have a stake worth just a few hundred pounds. But I do have at least one crypto millionaire — or at least he was a few weeks ago. These so-called currencies are so volatile that his holdings may have halved in value since we last spoke. Between mid-April and mid-July last year bitcoin fell by 50 per cent before doubling in the subsequent three months.

In the past, I would ask clients in our first meeting what savings and investments they own. I now have to ask specifically about cryptocurrencies. This is because most people do not seem to see them as investments. So what are they?

This question is important, not least because it governs how they are treated in relation to tax. There is a common perception that the profits of dabbling in crypto assets are not taxable. This is not the case. HM Revenue & Customs has a whole manual on the subject.

Some people try to argue that when you buy crypto assets in the hope that they will appreciate you are merely gambling and that gambling winnings are free of tax. I would not dispute that investing in cryptocurrencies is a gamble and you risk losing everything, but HMRC imposes special levies on the gambling industry that do not apply to these assets.

This means HMRC wants its share of the proceeds — in one way or another. If you are working and paid in cryptocurrency then it is taxed as income. If you sell, swap or spend crypto assets then any profits are taxed as a capital gain.

Last year Tesla, the carmaker, announced plans — briefly enacted before being reversed — to allow buyers to pay with bitcoin. I met one man who suggested that if he bought a Tesla with his crypto profits his money would not be converted into sterling, would not trigger a taxable event and would not be of interest to HMRC. I said: “But it will have been converted to a Tesla, and that will interest them — very much.”

Weekly newsletter

For the latest news and views on fintech from the FT’s network of correspondents around the world, sign up to our weekly newsletter #fintechFT

Sign up here with one click

Even if you exchange your tokens for a different type of crypto asset, you will still be liable for tax on any profits.

Others recognise the tax implications of cashing in their crypto assets but assume that HMRC will not know about them and so believe they will not be caught if they do not declare their gains. This is not true either.

HMRC works with large crypto exchanges, requiring them to share customer information. It is now using that data to send out “nudge” letters, reminding investors of their responsibilities and liabilities.

There are ways to mitigate the impact of having had a successful run investing in crypto assets.

We each have a tax-free allowance of £12,300. If you bank profits under that limit — and remember to take into account realised gains on other assets held outside a pension or Isa wrapper — you will not be liable for capital gains tax (CGT). If you breach that limit you must pay.

You can give assets to your spouse or civil partner without triggering a CGT event. This can be a good way of effectively doubling your allowance. If you are a higher-rate taxpayer and your partner is a basic-rate taxpayer, then splitting the assets first is particularly sensible when a CGT bill is likely to arise from their disposal.

You would pay 20 per cent on any gains above the tax-free limit. If your partner’s taxable gains, added to any taxable income for the year, do not take them beyond the basic-rate limit — £50,270 — they will pay just 10 per cent.

We are coming to the end of the tax year. You could liquidate the assets on either side of April 6 to take advantage of two years’ worth of allowance in a short period.

If you are feeling generous you can also donate a crypto asset to charity. You must not cash it in first. You will have to transfer ownership to the charity, which might be easier said than done.

Something else worth knowing is that you can offset realised losses against your gains. It is important to keep a note of these during the year, especially if you are trading regularly. There is no limit on the amount or number of losses you can offset. You can even carry forward any unused capital losses into the following three years if they extend beyond your gains.

Losing your private key and being unable to recover your crypto assets does not count as a loss in the eyes of HMRC, though I appreciate it must feel like one to anyone unfortunate enough to be in this position.

As a final aside, it is worth remembering that crypto assets will be property for the purposes of inheritance tax (IHT) and this will need to be factored into any IHT planning.

It is hard to understand crypto assets. It is pretty hard to understand the UK tax system, too. But if you are going to invest in the first then you need to get your head around the second. Failure to do so could leave you with a very painful bill from HMRC — perhaps when you have already spent your winnings.

Rebecca Aldridge is a chartered financial planner and founder of Balance Wealth Planning



Source link

54 Comments
  1. Fhsibz says

    buy generic levofloxacin levaquin pill

  2. Eimpaw says

    clozaril 100mg generic buy ipratropium 100 mcg for sale order generic decadron

  3. Rnoqwx says

    methotrexate 10mg price cost coumadin 5mg reglan sale

  4. Kuusxk says

    order generic ranitidine ranitidine 300mg over the counter order celecoxib 200mg pill

  5. Hdjtwd says

    buy deltasone 20mg pills order prednisone 10mg generic amoxicillin 250mg cheap

  6. Psbceh says

    tadalafil price buy generic voltaren 50mg order indocin 50mg online cheap

  7. Auvetq says

    naprosyn 500mg over the counter buy prevacid 30mg prevacid 30mg usa

  8. Fmsvmw says

    buy clarithromycin pills catapres medication purchase antivert

  9. Jjxhup says

    albuterol pill order pantoprazole online cheap ciprofloxacin drug

  10. Vwcofk says

    purchase tiotropium bromide pills generic minocycline order terazosin 5mg generic

  11. Jgmmoa says

    buy singulair 10mg online sildenafil 50mg generic viagra pills 200mg

  12. Lajnef says

    cialis generic Real cialis online tadalafil usa

  13. Ywdssi says

    buy cialis 10mg online cheap jackpot party casino gambling meaning

  14. Cdktbd says

    ivermectin new zealand buy generic symmetrel 100 mg dapsone 100mg price

  15. Xiqbez says

    online slots real money black jack card game free roulette games

  16. Dfqzkq says

    parx casino online casino card games hollywood casino online

  17. Gcwmdd says

    adalat 10mg usa order adalat online cheap purchase fexofenadine for sale

  18. Pljrmk says

    online casino slots no download affordable term papers help writing research paper

  19. Lbsqcr says

    buy ramipril 10mg online purchase arcoxia generic etoricoxib 60mg sale

  20. Ocygpe says

    order doxycycline generic doxycycline 100mg generic cleocin 300mg us

  21. Pqbfwi says

    college essay assistance purchase arava generic order sulfasalazine

  22. Kycpha says

    mesalamine order order astelin 10ml irbesartan online buy

  23. Cuwulp says

    benicar 10mg uk buy olmesartan 10mg pill buy depakote 250mg sale

  24. Ghdjhr says

    buy clobetasol online cordarone 100mg brand amiodarone canada

  25. Hnwhis says

    acetazolamide order azathioprine 50mg without prescription order generic azathioprine

  26. Noxjtj says

    lanoxin 250 mg ca lanoxin cheap buy generic molnupiravir 200 mg

  27. Umuvtf says

    order amoxicillin 250mg generic stromectol 3mg over the counter stromectol for sale online

  28. Rvtfjo says

    order generic dapoxetine 30mg oral avana 100mg motilium drug

  29. Ocwbqa says

    nortriptyline online order purchase nortriptyline pill paxil us

  30. Bhxahz says

    indocin 75mg without prescription cenforce cheap cenforce without prescription

  31. Jrkipe says

    purchase famotidine generic buy prograf sale order mirtazapine 30mg for sale

  32. Qmirsz says

    buy doxycycline buy oral methylprednisolone medrol drug

  33. Lncmds says

    order ropinirole 2mg generic labetalol online order order generic labetalol 100mg

  34. Afnzjp says

    cheap tadalafil 20mg buy tadacip 10mg order generic trimox 500mg

  35. Yrqisk says

    fenofibrate sale tricor 200mg us sildenafil oral

  36. Khpdjs says

    buy nexium 20mg pill furosemide 100mg sale purchase furosemide pills

  37. Tdmmdc says

    purchase tadalafil sale Cialis overnight delivery buying ed pills online

  38. Klgsvv says

    minocycline order online cheap neurontin terazosin buy online

  39. Hxmuan says

    provigil online buy promethazine oral promethazine us

  40. Gqiwpt says

    order generic deltasone 10mg purchase deltasone online amoxil canada

  41. Mnxflk says

    buy clomid online cheap generic clomid 50mg prednisolone 10mg pill

  42. Moppnd says

    order sildenafil 100mg sale propecia sale proscar online order

  43. Tjxvch says

    isotretinoin 10mg us order prednisone 20mg generic buy ampicillin 250mg for sale

  44. Pfcfqh says

    zofran 8mg tablet order amoxil 500mg generic buy trimethoprim online

  45. Pujcpb says

    how much does ivermectin cost herbal ed pills prednisone 5mg without prescription

  46. Makunh says

    purchase albuterol generic cost synthroid 75mcg augmentin usa

  47. Fwkwfk says

    buy isotretinoin generic order amoxicillin 250mg generic zithromax oral

  48. Fmsczl says

    purchase provigil generic order lopressor 50mg pills order metoprolol online cheap

  49. Vmibax says

    prednisolone 40mg generic order gabapentin 600mg lasix 40mg sale

  50. Nzhxlr says

    dutasteride cost dutasteride online order xenical for sale online

  51. Cdzywf says

    order doxycycline generic monodox generic how to get zovirax without a prescription

  52. Ojvjvl says

    order azathioprine 50mg pills imuran 50mg oral buy generic naprosyn 500mg

  53. Hollkk says

    order cefdinir without prescription buy cefdinir pill protonix 20mg over the counter

  54. Ehqvze says

    cheap oxybutynin prograf over the counter buy trileptal 300mg pills

Leave A Reply

Your email address will not be published.