Help with doing my crypto taxes in UK please

a1234555

I have one little question when it comes to accounting for my taxes after selling off my investment (I guess this doesn't have to be crypto and could be many other assets). If I bought .25 bitcoin 3 times in 1 financial year and sold 0.25 of this at some point, do I have to account as if I sold the first 0.25btc or could I say it was the most recent 0.25btc chunk?

I must add, although I am now in profit I strongly recommend against putting any serious money into crypto that you are not prepared to lose.

eskbanker

It's neither the first nor the last, you have to work out the average unit cost across the pool of all your purchases (of the same investment) and base your chargeable gain on that.

a1234555

Ah, your avatar sums up my post really well as this is news to me! Do you know if I can find a template spreadsheet somewhere for this? I've also just read on the 30 day rule and how this requires a new pool for the same asset, but what I've kept buying and selling more within 30 days again, would I have more than 2 pools? This is way more confusing than I thought! 

masonic

a1234555 said:

Ah, your avatar sums up my post really well as this is news to me! Do you know if I can find a template spreadsheet somewhere for this? I've also just read on the 30 day rule and how this requires a new pool for the same asset, but what I've kept buying and selling more within 30 days again, would I have more than 2 pools? This is way more confusing than I thought! 

The 30 day rule is specific to shares and related securities. The general guidance can be found here: https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg13350 (and subsequent pages). If you were buying and selling at market prices and/or at arms length, and the parties to the transactions were exposed to a movement in the price of the asset between sale and repurchase, then it could be considered to be a genuine disposal and reacquisition.

Edit: On looking at the definition of 'securities' here, it would seem bitcoin does meet the criteria to be considered a security for which the 30 day share matching rules do apply, although this is not going to be material if all of the trades under consideration were made in the same tax year.

a1234555

I've usually been setting buy prices to significantly lower than the market rate and sell prices at significantly higher. Are you saying this would be considered as trading instead?

masonic

a1234555 said:

I've usually been setting buy prices to significantly lower than the market rate and sell prices at significantly higher. Are you saying this would be considered as trading instead?

No, you wouldn't be considered a trader for casually buying and selling bitcoin a few times over.

Perhaps a worked example will be helpful...

Let's say you bought 0.5 BTC for £5,000, then sold that 0.25 BTC for £3,500, so your acquisition price of the 0.25 BTC was £2,500, your sale price was £3,500 and you have a further 0.25 BTC with an acquisition price of £2,500. You have a capital gain of £1,000

Then, within 30 days, you bought back 0.25 BTC for £3,000. This is matched against the disposal, so you no longer have a £1,000 capital gain. The repurchase cost of £3,000 now becomes the acquisition cost and this is used together with the earlier sale proceeds of £3,500 to recalculate the capital gain as £500. The original acquisition cost of £2,500 becomes the acquisition cost of the 0.25 BTC that was bought back and so the other £500 of capital gain is priced in.

The net position is that you have a pool of 0.5 BTC with an acquisition cost of £5,000, and a £500 crystallised capital gain.

If you then sold 0.25 BTC for £5,000, and bought back that 0.25 BTC for £4,000 <30 days later, you'd again use the repurchase and sale costs to calculate the gain due to matching (£1,000) and you'd still have 0.5 BTC with and acquisition cost of £5,000, and a £1,500 total crystallised capital gain.

If you finally sold 0.25 BTC for £8,000, and bought back after 31 days at £6,000, you would in this instance match to the original purchase. Your gain would be £8,000 - £2,500 = £5,500, and you would have a pool of 0.5 BTC with an acquisition cost of £2,500 + £6,000 = £8,500, and a total crystallised capital gain of £7,000.

It is no coincidence that this £7,000 is the same gain as could be calculated from each pair of chronological purchases-sales (£1,000, then £2,000, then £4,000), so if all of your buying and selling has been within the same tax year, and you have sold out completely, the calculations could be simpler than you think.