CryptoassetsSep 6 2022

How to manage CGT on cryptoassets

  • Describe some of the tax challenges relating to the disposal of cryptoassets
  • Explain how losses are treated
  • Identify the use of 'negligible value' claim
  • Describe some of the tax challenges relating to the disposal of cryptoassets
  • Explain how losses are treated
  • Identify the use of 'negligible value' claim
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CPD
Approx.30min
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CPD
Approx.30min
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How to manage CGT on cryptoassets
(FT Montage/Fotoware)

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

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CPD
Approx.30min
Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.
  1. Which of the following is NOT treated as a disposal of a cryptoasset for tax purposes?
  2. How do you calculate the taxable gain on a cryptoasset disposal?
  3. Where investors acquire the same class of cryptoasset within 30 days of a sale then the newly acquired shares are matched against those sold, true or false?
  4. For most individuals, disposals of cryptoassets will be subject to CGT, except if they have not exceeded the £12,300 allowance, true or false?
  5. What happens if a loss is calculated on the disposal?
  6. It is possible to make a 'negligible value' claim against a loss crystallised on a cryptoasset, true or false?
  7. To bank your CPD you must sign in or Register.