Bitcoin

Type_45

Am I right in saying that you are able to make £12,300 in profits from Bitcoin, every year, without having to declare it or pay tax?

Not that I've made money. I've lost money overall. But just asking.

masonic

Type_45 said:

Am I right in saying that you are able to make £12,300 in profits from Bitcoin, every year, without having to declare it or pay tax?

Not that I've made money. I've lost money overall. But just asking.

If by profits you mean capital gains from trading it, then yes, subject to you not having capital gains from other sources.

onthebench

Type_45 said:

Am I right in saying that you are able to make £12,300 in profits from Bitcoin, every year, without having to declare it or pay tax?

Not that I've made money. I've lost money overall. But just asking.

Yes, crypto gains count towards your capital gains allowance. See https://www.gov.uk/government/publications/tax-on-cryptoassets/cryptoassets-for-individuals

Type_45

onthebench said:

Type_45 said:

Am I right in saying that you are able to make £12,300 in profits from Bitcoin, every year, without having to declare it or pay tax?

Not that I've made money. I've lost money overall. But just asking.

Yes, crypto gains count towards your capital gains allowance. See https://www.gov.uk/government/publications/tax-on-cryptoassets/cryptoassets-for-individuals

I know. That's not what I asked.

bowlhead99

Type_45 said:

I would far rather invest in bitcoin through my ISA for tax reasons. Does anyone know of a fund where this is possible? 

Cryptocurrency isn't an allowable asset type for an ISA, and ISAs can't hold derivatives such as CFDs and options to get exposure that way. Technically, ISAs are allowed to hold exchange traded notes / exchange traded certificates where the thing traded on a stock exchange is a loan note backed by the bitcoin, with an annual management fee, just as you can buy ETFs and ETCs listed on a stock exchange and backed by gold. 

However, unfortunately the FCA decided to ban the sale of cryptocurrency derivatives and ETN-type products to UK retail customers a few months ago, which became effective this week. So the mainstream UK brokers and investment platforms which could offer these to retail investors up to last month, will no longer allow you to buy them in your ISA now. If you have them you can keep them, and dispose of them whenever you like (I still have one in my pension, and have made some sales in the last couple of months as the price went crazy), but if you don't have them they won't sell you them now.

FCA bans the sale of crypto-derivatives to retail consumers | FCA

As the FCA ban only extends to crypto derivatives such as ETCs / ETNs  rather than to funds which hold a broad portfolio of assets with diversification of risk (such as open ended funds and investment trusts), it would be possible to take 'exposure' to Bitcoin amongst a bunch of other things if you found an investment manager running an ISA-qualifying fund or IT which had BTC  or a BTC ETF as a portion of its own portfolio. 

There are a couple in the US (for example Grayscale has a Bitcoin Trust  running as an ETF, and some other mutual funds or ETFs invest into it). However, I'm not aware of any at the moment which would be accessible inside a UK ISA, because those US products won't issue the required prospectus and KID documents meeting the standards which would be required if offering to UK investors.

If you are looking to take exposure while minimising taxes - as an alternative to buying in an ISA you could use certain derivatives such as spreadbets. However, due to the FCA ban you wouldn't be able to do this as a retail investor and would need to sign up to a provider such as IG.com as a professional client.  If you don't have hundreds of thousands of liquid assets or a history of consistently placing leveraged trades of significant value they are unlikely to accept you as such, and you would lose all 'retail customer' protections.

bowlhead99

Type_45 said:

onthebench said:

Type_45 said:

Am I right in saying that you are able to make £12,300 in profits from Bitcoin, every year, without having to declare it or pay tax?

Not that I've made money. I've lost money overall. But just asking.

Yes, crypto gains count towards your capital gains allowance. See https://www.gov.uk/government/publications/tax-on-cryptoassets/cryptoassets-for-individuals

I know. That's not what I asked.

As onthebench said, gains from selling crypto count towards your capital gains exemption which is the £12300 figure you mention.

You only get a gain or a loss when you buy or sell something for more or less than you paid for it, and so if your profit is theoretical on paper without actually selling, it is not actually a gain, and likewise if your loss is just that something has gone down in value on paper it is not a loss until you actually sell.

If your gains net of losses for a particular tax year (including crypto, shares, bonds, investments funds, second properties etc) are under £12300 there will be no tax to pay as the net position is covered by your exemption, but:

*If* you already fill out a self assessment return for some other reason, you are expected to include your capital gains calcuation if:

- your total sales proceeds in the tax year are over 4x the annual exemption, you would need to include your profits or losses on the return and give your calculation to HMRC even your total gains were below the £12300. In other words if you did loads of buying and selling and had £49500 of proceeds but only £12000 of gains (or even £12000 of losses), HMRC would still want to receive your numbers so that they can check them if they want to.

- you made total gains of over £12300 and the net position is only under £12300 because of offsetting losses, you need to give HMRC the calculation to claim the losses so they can be happy that you're correctly below £12300 net.

If you are in a position where you have made losses overall for the year, you won't get credit for those losses to carry forward to offset against any future gains unless you declare them to HMRC in the usual timescale.

So for example if you lost £5k in selling shares and cryptocurrencies this tax year it can be worth declaring the loss and providing the calculation to HMRC, because then in some future year if you make £18,000 of capital gains on something in a year when the annual exemption is £13,000, you can use your £5k of brought forward previous losses to offset the £5000 of gains that were in excess of your exemption in that future year. Without having those losses from the previous year recorded and available to carry forward, you would need to pay tax on whatever wasn't covered by the exemption.

HansOndabush

bowlhead99 said:

Type_45 said:

I would far rather invest in bitcoin through my ISA for tax reasons. Does anyone know of a fund where this is possible? 

However, unfortunately the FCA decided to ban the sale of cryptocurrency derivatives and ETN-type products to UK retail customers a few months ago, which became effective this week.

Sounds very fortunate and sensible to me.

onthebench

Type_45 said:

onthebench said:

Type_45 said:

Am I right in saying that you are able to make £12,300 in profits from Bitcoin, every year, without having to declare it or pay tax?

Not that I've made money. I've lost money overall. But just asking.

Yes, crypto gains count towards your capital gains allowance. See https://www.gov.uk/government/publications/tax-on-cryptoassets/cryptoassets-for-individuals

I know. That's not what I asked.

So what are you asking?
Without knowing what other capital gains or losses you have made in a given year, it is impossible to answer whether you can make £12,300 in profits from bitcoin without paying tax.

Assuming that you have no other capital gains to take into account, then you can crystallise gains up to your CGT allowance in a given tax year without being liable for CGT.

The more complicated part is how you calculate the gains. From a brief reading of the page I linked, you treat each cryptocurrency as a pool with an averaged cost base of all purchases and deduct the relevant portion of that cost base pool from your disposal price to calculate your gain. 

However if you are selling within 30 days of buying then you use the actual cost base of your most recent purchase as the cost base (along with the relevant amount of the pooled cost base if you are selling more than you had bought in the last 30 days).

So it is not as simple as “You can make X amount of profit from bitcoin per year without paying tax”.

If you sold a relatively small amount of bitcoin (such that the gains could not exceed your CGT threshold even if the cost base was zero) then I don’t know if you would have to declare it. I suspect you probably should but I’m sure someone more knowledgable could advise. 

Type_45

bowlhead99 said:

Type_45 said:

I would far rather invest in bitcoin through my ISA for tax reasons. Does anyone know of a fund where this is possible? 

Cryptocurrency isn't an allowable asset type for an ISA, and ISAs can't hold derivatives such as CFDs and options to get exposure that way. Technically, ISAs are allowed to hold exchange traded notes / exchange traded certificates where the thing traded on a stock exchange is a loan note backed by the bitcoin, with an annual management fee, just as you can buy ETFs and ETCs listed on a stock exchange and backed by gold. 

However, unfortunately the FCA decided to ban the sale of cryptocurrency derivatives and ETN-type products to UK retail customers a few months ago, which became effective this week. So the mainstream UK brokers and investment platforms which could offer these to retail investors up to last month, will no longer allow you to buy them in your ISA now. If you have them you can keep them, and dispose of them whenever you like (I still have one in my pension, and have made some sales in the last couple of months as the price went crazy), but if you don't have them they won't sell you them now.

FCA bans the sale of crypto-derivatives to retail consumers | FCA

As the FCA ban only extends to crypto derivatives such as ETCs / ETNs  rather than to funds which hold a broad portfolio of assets with diversification of risk (such as open ended funds and investment trusts), it would be possible to take 'exposure' to Bitcoin amongst a bunch of other things if you found an investment manager running an ISA-qualifying fund or IT which had BTC  or a BTC ETF as a portion of its own portfolio. 

There are a couple in the US (for example Grayscale has a Bitcoin Trust  running as an ETF, and some other mutual funds or ETFs invest into it). However, I'm not aware of any at the moment which would be accessible inside a UK ISA, because those US products won't issue the required prospectus and KID documents meeting the standards which would be required if offering to UK investors.

If you are looking to take exposure while minimising taxes - as an alternative to buying in an ISA you could use certain derivatives such as spreadbets. However, due to the FCA ban you wouldn't be able to do this as a retail investor and would need to sign up to a provider such as IG.com as a professional client.  If you don't have hundreds of thousands of liquid assets or a history of consistently placing leveraged trades of significant value they are unlikely to accept you as such, and you would lose all 'retail customer' protections.

Thank you for that. Well, looks like Bitcoin in an ISA won't be available for a while then. I will just stick to using Coinbase and make sure that I don't make more than £12,300 in any given financial year (which I'm in no danger of anyway).

Michael121

Type_45 said:

Thank you for that. Well, looks like Bitcoin in an ISA won't be available for a while then. I will just stick to using Coinbase and make sure that I don't make more than £12,300 in any given financial year (which I'm in no danger of anyway).

Why would you want to avoid earning more money after the CGT allowance.