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Crypto CGT

How to buy, profit and invest in crypto currencies or NFTs
Urbandreamer
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Crypto CGT

#650981

Postby Urbandreamer » March 3rd, 2024, 1:07 pm

Ok, a word of waning.

HMRC currently have an "amnesty" upon crypto CGT which will be coming to an end soon.
Basically, pay your tax and they will give you a pat on the head, rather than fine you.

As I said, this is likely coming to an end soon. So if you are involved in crypto, you need to track and calculate your gains and tax liability.

I've just spent a week doing this for the first time. In the future it will likely take me minutes. But It's taken at least a week, I started a couple of weeks ago but got nowhere until the start of this week.

There are online companies and accountants that will help, but such help is only as good as the information that you provide them, so you are going to have to do the difficult stuff anyway.

I downloaded the Bitty tax software and worked through their example. Then started building a spreadsheet in the required format with my data.

At the end I got a nice pdf report showing that I had no tax liability over the last two years, but that my gains (if crystalized) were reaching the CGT allowance for next year. So I've taken steps to crystalize some gains this tax year to give me more head room next year.

Can I strongly recommend that you do the work if you own any crypto. HMRC are known to love fines.

Bubblesofearth
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Re: Crypto CGT

#651008

Postby Bubblesofearth » March 3rd, 2024, 4:31 pm

Urbandreamer wrote:Ok, a word of waning.

HMRC currently have an "amnesty" upon crypto CGT which will be coming to an end soon.
Basically, pay your tax and they will give you a pat on the head, rather than fine you.

As I said, this is likely coming to an end soon. So if you are involved in crypto, you need to track and calculate your gains and tax liability.

I've just spent a week doing this for the first time. In the future it will likely take me minutes. But It's taken at least a week, I started a couple of weeks ago but got nowhere until the start of this week.

There are online companies and accountants that will help, but such help is only as good as the information that you provide them, so you are going to have to do the difficult stuff anyway.

I downloaded the Bitty tax software and worked through their example. Then started building a spreadsheet in the required format with my data.

At the end I got a nice pdf report showing that I had no tax liability over the last two years, but that my gains (if crystalized) were reaching the CGT allowance for next year. So I've taken steps to crystalize some gains this tax year to give me more head room next year.

Can I strongly recommend that you do the work if you own any crypto. HMRC are known to love fines.


I thought winnings from gambling were tax free in the UK.

BoE

Urbandreamer
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Re: Crypto CGT

#651011

Postby Urbandreamer » March 3rd, 2024, 4:47 pm

Bubblesofearth wrote:I thought winnings from gambling were tax free in the UK.

BoE


Ah, but it isn't gambling as far as HMRC is concerned, whatever you may think.

Here, have a link to HMRC's info on the subject.
https://www.gov.uk/guidance/tell-hmrc-a ... yptoassets

ignotus20
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Re: Crypto CGT

#651403

Postby ignotus20 » March 5th, 2024, 1:55 pm

Urbandreamer wrote:
Bubblesofearth wrote:I thought winnings from gambling were tax free in the UK.

BoE


Ah, but it isn't gambling as far as HMRC is concerned, whatever you may think.


This is correct and reasonable. If you make a large capital gain from buying a deep out of the money long-dated option, even though it might have felt like a bit of a gamble when you entered the trade, it's still a capital gain.

scrumpyjack
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Re: Crypto CGT

#651408

Postby scrumpyjack » March 5th, 2024, 2:26 pm

and if you do a lot of trading in crypto, HMRC might decide it is a trade and the gains liable to income tax, not cgt!

Urbandreamer
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Re: Crypto CGT

#651442

Postby Urbandreamer » March 5th, 2024, 4:15 pm

ignotus20 wrote:
Urbandreamer wrote:
Ah, but it isn't gambling as far as HMRC is concerned, whatever you may think.


This is correct and reasonable. If you make a large capital gain from buying a deep out of the money long-dated option, even though it might have felt like a bit of a gamble when you entered the trade, it's still a capital gain.


To be fair I suspected that BJ is well aware of HMRC's position. His point really was that BTC is gambling and anyone who gets involved should accept that view, regardless of their own opinion.

Of course he may of been trying to be funny but omitted any indication of the fact.

I responded and chose not to indicate that my comment was laced with a fair dose of irony.

It's pointless to get into a ding-dong on the subject.

ZacSc
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Re: Crypto CGT

#652224

Postby ZacSc » March 8th, 2024, 8:43 am

Urbandreamer wrote:
Bubblesofearth wrote:I thought winnings from gambling were tax free in the UK.

BoE


Ah, but it isn't gambling as far as HMRC is concerned, whatever you may think.

Here, have a link to HMRC's info on the subject.
https://www.gov.uk/guidance/tell-hmrc-about-unpaid-tax-on-cryptoassets/

They have a long list of difficult metrics.

    - the number of cryptoasset transactions
    - the amount of proceeds or income that you have not declared, including how many years you need to disclose (before any costs or expenses have been subtracted)
    - the acquisition costs of the cryptoassets and any expenses incurred
    - the amount of gains or profit you made (including any calculations)
    - any cryptoassets exchanges that were used
    - the number of cryptoassets that were disposed
    - the tax and interest you owe (including any calculations)
    - if you used a cryptoasset commercial calculator (and which one)

For example, it is quite difficult to count the number of cryptocurrency transactions. If it is grid trading on Binance, then after closing the grid, all the data about the transactions made disappears. Well, I haven't found how to see it after closing the grid. Maybe it is shown somewhere.

ZacSc
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Re: Crypto CGT

#652225

Postby ZacSc » March 8th, 2024, 8:46 am

Urbandreamer wrote:
ignotus20 wrote:
This is correct and reasonable. If you make a large capital gain from buying a deep out of the money long-dated option, even though it might have felt like a bit of a gamble when you entered the trade, it's still a capital gain.


To be fair I suspected that BJ is well aware of HMRC's position. His point really was that BTC is gambling and anyone who gets involved should accept that view, regardless of their own opinion.

Of course he may of been trying to be funny but omitted any indication of the fact.

I responded and chose not to indicate that my comment was laced with a fair dose of irony.

It's pointless to get into a ding-dong on the subject.

In my opinion, BTC is gambling. But if you look at the stock market, it is also gambling. Isn't it? ;)

Bubblesofearth
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Re: Crypto CGT

#652229

Postby Bubblesofearth » March 8th, 2024, 9:11 am

ZacSc wrote:
In my opinion, BTC is gambling. But if you look at the stock market, it is also gambling. Isn't it? ;)


Depends. The difference between gambling and investing is not down to the nature of the asset but rather the mind set of the individual.

BoE

Urbandreamer
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Re: Crypto CGT

#652239

Postby Urbandreamer » March 8th, 2024, 9:38 am

Bubblesofearth wrote:
ZacSc wrote:
In my opinion, BTC is gambling. But if you look at the stock market, it is also gambling. Isn't it? ;)


Depends. The difference between gambling and investing is not down to the nature of the asset but rather the mind set of the individual.

BoE


Is it? Or is it down to an outsider judging an individual?

No that was not a dig at you, but rather the host who claim that people only gamble upon crypto.

FWIW, words are slippery. I maintain that there is a strong difference between saving and investing. In my opinion husbanding money in savings accounts or government bonds is not investing. Others on TLF argue that I'm wrong and that you can invest in government bonds.
Investing to me carries connotations of industry. You can invest in productive land, a business or even yourself.

Naturally I maintain that my hardware wallet contains my BTC savings. Some might claim that it's my marker, as to them I'm gambling, that is were they to think about what it represents.

I think that the problem is that at some point you must talk in the whole. My portfolio is mostly equities, but I have cash in brokers accounts and BTC. Others have a 60/40 equities/bonds portfolio.
Do we talk in terms of an investment portfolio?

Bubblesofearth
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Re: Crypto CGT

#652330

Postby Bubblesofearth » March 8th, 2024, 4:42 pm

Urbandreamer wrote:
Is it? Or is it down to an outsider judging an individual?



I've been both an investor and a gambler and am personally very clear on the difference between the two.

Investing typically involves seeking a reasonable return over a long time period with minimal involvement of emotion.

Gambling is the complete opposite, looking for exceptional returns in a short time and usually involves emotional highs and lows.

Basically the difference is all about psychology.

BoE

ps I confess I was a bit tongue in cheek with my comment re Bitcoin. As part of a larger portfolio and with a long time horizon it can be seen as investing. Just about ;)

Lootman
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Re: Crypto CGT

#652333

Postby Lootman » March 8th, 2024, 4:53 pm

ignotus20 wrote:
Urbandreamer wrote:Ah, but it isn't gambling as far as HMRC is concerned, whatever you may think.

This is correct and reasonable. If you make a large capital gain from buying a deep out of the money long-dated option, even though it might have felt like a bit of a gamble when you entered the trade, it's still a capital gain.

Spread betting looks a lot like options trading. But the taxman sees the former as gambling (no tax) and the latter as investing (CGT).

Based on my limited knowledge of Bitcoin I'd take the view that CGT applies, and keep records of the cost basis and disposal details.

Urbandreamer
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Re: Crypto CGT

#652337

Postby Urbandreamer » March 8th, 2024, 5:30 pm

Lootman wrote:
ignotus20 wrote:This is correct and reasonable. If you make a large capital gain from buying a deep out of the money long-dated option, even though it might have felt like a bit of a gamble when you entered the trade, it's still a capital gain.

Spread betting looks a lot like options trading. But the taxman sees the former as gambling (no tax) and the latter as investing (CGT).

Based on my limited knowledge of Bitcoin I'd take the view that CGT applies, and keep records of the cost basis and disposal details.


CGT applies because HMRC or the government has decided so. They don't feel the same way about currency movements if you hold foreign currency in a bank account, though do if you hold them in a trading account!
https://www.gov.uk/hmrc-internal-manual ... al/cg78300

TBH this is something that does really irritate me. I can see their point in that it's not easy to distinguish between speculation/trading and using BTC as a currency. However it does very much feel that they are picking and choosing. I have to calculate CGT if I spend £5 worth of BTC upon a pint of beer! Oh and yes I have done that.

Re gambling and taxes we need a correction. Tax IS charged upon gambling. The bookmaker is the one who pays it for you though, so gains have already had the tax paid upon the stake.
https://www.gov.uk/guidance/pay-gambling-duties

Oh and as for keeping records, most don't feel the need when they don't feel that they will need to provide an account. Usually as they don't expect to have gains enough to exceed the CGT allowance. Such was the case with me in 2022. I now seriously regret not keeping better records as it's not as simple as just what you paid and what it was worth when you spent it.

1nvest
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Re: Crypto CGT

#653292

Postby 1nvest » March 13th, 2024, 3:22 pm

Urbandreamer wrote:
Lootman wrote:Spread betting looks a lot like options trading. But the taxman sees the former as gambling (no tax) and the latter as investing (CGT).

Based on my limited knowledge of Bitcoin I'd take the view that CGT applies, and keep records of the cost basis and disposal details.


CGT applies because HMRC or the government has decided so. They don't feel the same way about currency movements if you hold foreign currency in a bank account, though do if you hold them in a trading account!
https://www.gov.uk/hmrc-internal-manual ... al/cg78300

TBH this is something that does really irritate me. I can see their point in that it's not easy to distinguish between speculation/trading and using BTC as a currency. However it does very much feel that they are picking and choosing. I have to calculate CGT if I spend £5 worth of BTC upon a pint of beer! Oh and yes I have done that.

Re gambling and taxes we need a correction. Tax IS charged upon gambling. The bookmaker is the one who pays it for you though, so gains have already had the tax paid upon the stake.
https://www.gov.uk/guidance/pay-gambling-duties

Oh and as for keeping records, most don't feel the need when they don't feel that they will need to provide an account. Usually as they don't expect to have gains enough to exceed the CGT allowance. Such was the case with me in 2022. I now seriously regret not keeping better records as it's not as simple as just what you paid and what it was worth when you spent it.

What about the total capital loss from having lost your crypto key being used to offset capital gains elsewhere?

Urbandreamer
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Re: Crypto CGT

#653300

Postby Urbandreamer » March 13th, 2024, 3:53 pm

1nvest wrote:
Urbandreamer wrote:
CGT applies because HMRC or the government has decided so. They don't feel the same way about currency movements if you hold foreign currency in a bank account, though do if you hold them in a trading account!
https://www.gov.uk/hmrc-internal-manual ... al/cg78300

TBH this is something that does really irritate me. I can see their point in that it's not easy to distinguish between speculation/trading and using BTC as a currency. However it does very much feel that they are picking and choosing. I have to calculate CGT if I spend £5 worth of BTC upon a pint of beer! Oh and yes I have done that.

Re gambling and taxes we need a correction. Tax IS charged upon gambling. The bookmaker is the one who pays it for you though, so gains have already had the tax paid upon the stake.
https://www.gov.uk/guidance/pay-gambling-duties

Oh and as for keeping records, most don't feel the need when they don't feel that they will need to provide an account. Usually as they don't expect to have gains enough to exceed the CGT allowance. Such was the case with me in 2022. I now seriously regret not keeping better records as it's not as simple as just what you paid and what it was worth when you spent it.


What about the total capital loss from having lost your crypto key being used to offset capital gains elsewhere?


As you say, losses caused by losing your crypto key can be offset against other gains. The only thing that I have like that is the 0.01096691 BTC on FTX.
I paid £200 for it, so IF FTX does not pay it's creditors (the likely situation) then as far as the taxman is concerned I'm down £200.
I'll let others look up the current value of that missing bitcoin.

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Re: Crypto CGT

#654826

Postby ValentineBarnett » March 20th, 2024, 5:26 pm

Hi all. Guys, can you explain one thing to me. If I gift cryptocurrency, could this result in fines or penalties from tax authorities such as HMRC.

Urbandreamer
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Re: Crypto CGT

#654841

Postby Urbandreamer » March 20th, 2024, 5:47 pm

ValentineBarnett wrote:Hi all. Guys, can you explain one thing to me. If I gift cryptocurrency, could this result in fines or penalties from tax authorities such as HMRC.


It counts as a disposal for CGT purposes. Depending upon how much, other disposals and income, you might wind up with a tax liability. Provided you pay, no fines. If you don't pay, then fines and possibly penalties.

It's basically the same as were you to gift shares held outside of a tax wrapper.


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