Capital Gains Tax & Crypto In The UK
About Those Taxes
It's not often I talk about glamorous subjects such as tax but yesterday, I saw a great video on LeoFinance about tax strategy from @louisthomas, which is really important to know about and often overlooked. I posted a deep dive about 2 weeks ago in to how the UK capital gains taxes work with cryptocurrencies, trying to summarise the HMRC's "Cryptoassets: Tax For Individuals" comprehensive page.
From my understanding, any time you dispose of crypto (exchange it for any other crypto/fiat), then it is a taxable event and needs to be recorded. If your gains end up being above the threshold of £12,300 then you will have to pay Capital Gains Tax. You'll also need to know what the £ value was of the disposal at the time, which means needing to know what the £ value of the tokens you were trading at the time were.
Since I posted that and after watching Louis' video yesterday, the alarm bells starting ringing and, although I use Blockfolio, which is a great app to track all your transactions (you have to manually put them in), I realised that I'd signed up and used 6 exchanges and have done a lot of crypto swapping in that time. Thankfully, I am nowhere near the threshold for any of them but having to go back through 3 years of exchange history is going to be a right pain in the arse!
Getting Data From Exchanges
I managed to pull data from the 6 exchanges I've used but some have different ways of doing it and provide different information so if you use any of these exchanges, here's what I found out:
- Coinbase - gives you all transactions, £ value of transaction, amount, the wallet you sent the crypto to from your whole history
- Binance - Only gives you 3 months of transactions at a time but you can go back through your whole history and download unlimited csv files. Will only give you the BTC value of the transaction so you need to do digging on the £ price of BTC at the time.
- Huobi - You can only go back to the last 4 months of transactions so if you need to go back further, you will need to contact their support desk. Again, they only give BTC value of transactions so will need to find out the £ price of BTC at the time
- Kucoin - Only gives you 100 days of transactions at a time but you can go back through your whole history. You can only download 5 csv files in a 24 hour period. Only gives you the BTC value at the time
- Ionomy - You can download your whole history but this doesn't give all the information you need so you may have to go individually in each of your wallets on the exchange and copy/paste the info into an Excel file. This does provide the £ value of your transactions though which is pretty helpful.
- Bitshares - You can download your whole history (although I kept getting error messages so ended up just copying the text and pasting in to an Excel spreadsheet). You'll have to find the price information at the time of the crypto though.
Thankfully, all of them give the time stamp of the transaction so you can pinpoint the price - I did some research and found that this site (Investing.com) was the easiest to get around and had the information I needed... so far! Now I've pulled all the data, I need to add it all to a spreadsheet and see how it goes. Remember, this is the information HMRC say they need - full information on their site:
- The type of cryptoasset
- Date of the transaction
- If they were bought or sold
- Number of units
- Value of the transaction in pound sterling
- Cumulative total of the investment units held
- Bank statements and wallet addresses, if needed for an enquiry or review
Changing Tack?
After seeing that video from Louis, I will continue with the dollar cost averaging on the daily and weekly of buying BTC because that's an easy enough transaction to track, i.e. buying and never disposing (unless BTC does actually reach 6 figures, then I'll have to think about it haha) so for me, that's straight forward enough.
However, it's all the trades between crypto that I did to build positions on other crypto such as HIVE that has changed the game a bit. Even going from different tokens through swapping, Hive-Engine and converting HBD to HIVE, suddenly all became taxable events from December 2019 so it's going to be a fun few weeks going back through all of this! I think by the time I've gone back through all the data, I'll have missed the bull run LOL!
So if you don't hear from me for a while, you know where I am!
I'll probably decrease the frequency at which I buy alts unless there's a direct way to buy them via fiat and maybe I'll just have to bite the bullet for so called "handling fees" to avoid the taxable events. Would rather take 3% fee (which is an allowable cost) than 20% (being sucked away by CGT).
How about you - were you aware of all this in the UK? What's the tax situation like in your country with regards to crypto? Let me know in the comments below!
Take care
Nicky
Originally posted here
Interesting stuff, Nicky.
I don't think I'll every hit that threshold - but it does sound like a bit of time spent now setting up something to track each transaction (it's not that many for me, really) may save a bit of pain in the future...
Yeah definitely worth keeping track of things, it's why I recommend the Blockfolio app and you just manually put everything in there as it has all the information.
I'd recommend watching Louis' video as well from yesterday that I mentioned as it might give you more food for thought. Should any of the stuff moon then it may go over the threshold. Add to that the CGT threshold is being proposed to be lowered to between £2000-£4000 then suddenly, you may be a lot closer to the threshold than you think. Worth being aware of at the very least but make sure you track everything!
I'm going to have to go through 3 years worth of transactions on 6 exchanges. It would be 7 but one has collapsed haha! Thankfully, blockfolio is there but those two crypto assets have gone to 0 so may just write them off as losses anyway!
The next thing is figuring out how the actual F you do CGT Tax returns... I think there's a form on their site
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Thanks for the mention Nicky! Yeah, organising for taxes is a nightmare. Gotta be done though unfortunately
Yeah for sure! Going to be seeing spreadsheets in my sleep the next few weeks I think!
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STOPI've had a quick look at our regulations and you literally couldn't file a proper tax return if you wanted to. It's a makeshift document based on shares which holds no correlation to the fast paced and multi faceted world of crypto and tokenization of assets.
I would love to see a tax regulator try to make sense of the 50k transactions that i have made this year across 20 different exchanges and hundreds of tokens. I don't know why government have to make things so difficult and cant just call it an asset and tax a percent of whatever you convert back to fiat.
I spent X amount to purchase crypto assets. I turned Y amount back into fiat assets and tax the difference if there is a profit. They just don't like simplicity.
Hahaha, mate, I'm trying to make sense of it myself but jeez, I was a busy lad back in 2018 when I was getting my feet wet and even now with Hive-Engine tokens!
It used to be a lot simpler that you'd get taxed on whatever you cashed out to fiat but as always with the UK, there's a lot of complications that just have to be thrown in, why not! Unless they know something we don't like they are planning on adopting every crypto, then just treat crypto as one asset and that's it. Now it's just a case of having BTC really and take as easy route as possible to get to the other token you want.
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This would be the smart and easiest solution.
I'll worry about it when i actually take some profits from crypto. Until then i can just play dumb. Shouldn't be too hard.
Simple way round it is to move to a better country with easier tax laws and gain citizenship before BTC moons and you want to cash out some of your gains.
As simple as that 😂
Aha, my life coach has spoken! Off to Malta we go, dnb parties on the beach, sipping on some cocktails, paid for with BTC... Love the vision!
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That's the way Nicky... you're on to it kidda 😂
Become a bitcoin pirate, sailing the seven seas and only coming to land to throw a DnB party on the beach. Like Just like Maccaffe, it's a pirates life for me.
Yarrgggggg
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That wasn't my reading of the tax regulations: it talks about pooling, which is what I'm doing; and the taxable event comes when you withdraw crypto to fiat. Against each withdrawal, you can set a proportion of your investment and transaction costs. I guess it is going to be a case by case development, but there are general rules applying to all taxes about "fair estimates" and "reasonable assumptions/calculations".
The thing I haven't worked out yet is when I use crypto for direct purchases, as opposed to exchanging for fiat.
Yes if you are dollar cost averaging then pooling applies (or you're just adding to that crypto holding by some other means) but if you just did a one off purchase of a specific crypto then what you quoted from my initial post applies. Pooling is a nightmare to calculate and I just use an online tax calculator to work it out for me.
When you use crypto for buying stuff, as far as I can tell from what the current rules are, it would be classed as disposing of an asset and subject to cap gains as a taxable event.
It would be best to get a proper assessment from a tax advisor and consultant or give HMRC a call. When I spoke to them they clarified everything for me
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