How to manage CGT on cryptoassets

Following the above example, if you purchased five bitcoin for a total of £1,000, within 30 days of the second sale then your taxable gain on that second sale would be £5,500 because the 30-day tax rules would substitute your weighted cost with the subsequent acquisition cost. As can be seen, timing can make a material difference between the tax and commercial position.

Calculating the matching rules can be tedious, particularly where there are numerous transactions in a tax year (and within the 30 days following the year end).

Serial investors with multiple transactions may want to consider subscribing to a platform that tracks investment activity and calculates tax gains and losses automatically in real time.

Individual considerations

For most individuals, disposals of cryptoassets will be subject to CGT. If an individual’s total capital gains for a tax year are below £12,300 (currently), they will not pay any CGT as the gains will be covered by their annual CGT exemption.

If a loss is calculated on the disposal, this loss will be a capital loss. Capital losses are automatically offset against any capital gains made in the same tax year. This is regardless of whether your capital gains are below the annual CGT exemption.

CGT is currently charged at 10 per cent on capital gains if your combined income and taxable gains are less than £50,270. CGT is charged at 20 per cent for any excess above this figure. Utilising capital losses is therefore potentially worth a 20 per cent tax saving.

Where losses have not previously been claimed, there may be an opportunity to now make a claim.

If you do not have any capital gains in the same tax year as your capital loss – or your capital losses exceed your capital gains – then the excess capital losses will be carried forward and utilised against your first available taxable capital gains (after the use of your annual CGT exemption).

Investors who routinely file self-assessment tax returns will include their gain and losses on the relevant tax return. Any taxes will be payable on January 31 following the year end – ie CGT due for the year ended April 5 2022 are payable by January 31 2023.

Investors who do not file tax returns should register for self-assessment in good time to facilitate a filing by the January 31 deadline to avoid penalties.

Capital losses can be claimed up to four years from the end of the tax year in which the loss occurred. Therefore, where losses have not previously been claimed, there may be an opportunity to now make a claim.

Capital losses do not expire, therefore it may be worth considering crystallising crypto losses now if you anticipate future capital gains elsewhere.