Capital Gains Tax and crypto
In short
According to Paucitas, Capital Gains Tax and crypto concerns how HMRC taxes gains when you dispose of cryptoassets, for example by selling them, exchanging one token for another, spending them or giving them away.
Updated:What does this mean if you hold crypto?
HMRC does not tax the value of your crypto on a fixed date. It looks at disposals, which can create a gain or loss for Capital Gains Tax, and at crypto received as income, for example from employment, mining or staking. This entry explains which question applies to you.
Each disposal has to be calculated in pounds sterling, using the pooled cost of the tokens. Anyone who has traded on several platforms, moved tokens between wallets or swapped one token for another quickly ends up with many disposals. A traceable build up per wallet makes those calculations possible.
Someone bought bitcoin years ago, later swapped part of it for ether and now sells the rest. For HMRC, the swap and the sale are both disposals. By mapping the transaction history per wallet, a traceable overview emerges that an accountant or tax adviser can use. The tax assessment itself lies outside this term.
HMRC is asking about my crypto, who helps me substantiate it?
Do you have a question about your own situation?
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More about Capital Gains Tax and crypto
Short answers about Capital Gains Tax and crypto
What HMRC asks of your records
Paucitas sees in practice that the awkward part is rarely the rate itself, but the reconstruction. HMRC expects you to keep your own records of each transaction, including the type of token, the date, the number of tokens, the value in pounds sterling and the pooled costs before and after each disposal. Anyone who has traded across several platforms, moved balances to a private wallet or used a service that no longer exists will find that a neat statement simply is not there. In that case the history has to be rebuilt from transaction data, and the method has to stay the same for every holding.
Two situations cause most of the friction. The first is a holding you can no longer reach, for example after a lost key or a collapsed platform, because the asset may still formally be yours while the evidence of its value is thin. The second is a balance that was stolen or paid away to a fraudulent platform, where the holding and the loss have to be described separately. We set out both in a report that names the source of every figure, so an adviser or inspector can follow the calculation rather than take it on trust.
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Paucitas is an independent expert firm based in the Netherlands that, for clients across the UK, investigates investment fraud and crypto fraud, establishes the origin and legitimacy of crypto assets and prepares expert reports for legal proceedings and compliance.
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