Trading not investing
If you or your company trade in cryptoassets – rather than investing – then there are more options for utilising losses on sales of cryptoassets. However, HMRC have placed a high threshold to be deemed to be trading rather than investing in cryptoassets, so professional advice should be sought.
A personal trader who makes an overall net loss for a tax year has three options for utilising their loss:
- Option one, which is automatic, is to carry forward the trading loss and utilise it against their first available trading profits. This will save income tax at your marginal rate.
- Option two is to set the loss sideways against other non-trading income in either the tax year of the loss or the preceding tax year. The maximum loss that can be set sideways in any given tax year is £50,000 or 25 per cent of your total income (whichever is higher). This will also save income tax at your marginal rate.
If after option two you have sufficient unused losses then option three can be claimed. This is where you can offset the trading loss against capital gains in the tax year of loss or the preceding tax year. This will save CGT at either 10 per cent or 20 per cent, which is likely to be less efficient than options one or two.
Adam Bonell is a partner at HW Fisher