Tax returns & Bitcoin

Type_45

Does anyone know, or have any experience of whether you need to put Bitcoin losses/gains on a self assessment tax return?

This tax year (20/21) I've sold £8385, and then bought £2605.

I'm guessing that previous years won't be on the tax return.

macman

Are you gains within your annual CGT allowance?
As of today, we are in tax year 21/22, not 20/21.

Type_45

macman said:

Are you gains within your annual CGT allowance?
As of today, we are in tax year 21/22, not 20/21.

Yes, I'm referring to the tax year which has just ended. I'm having to do a self assessment tax return for 20/21. I don't usually do them.

And the bitcoin I just mentioned is my only capital gains.


In actual fact I've lost money on bitcoin over all.  Never gained anything in real terms. 

masonic

Type_45 said:

macman said:

Are you gains within your annual CGT allowance?
As of today, we are in tax year 21/22, not 20/21.

Yes, I'm referring to the tax year which has just ended. I'm having to do a self assessment tax return for 20/21. I don't usually do them.

And the bitcoin I just mentioned is my only capital gains.


In actual fact I've lost money on bitcoin over all.  Never gained anything in real terms. 

If your total disposals in the tax year are only £8385, then you don't need to declare them in your tax return.

Type_45

I did read somewhere (on this forum) that you don't need to declare capital gains below £12,400 if you don't do a self assessment tax return. But if you DO do a self assessment tax return then you must mention it.

As I say, my "gains" £8385. 

Malthusian

Type_45 said:

As I say, my "gains" £8385. 

Not what you said earlier.

This tax year (20/21) I've sold £8385, and then bought £2605.

If your gains are more than £12,300 in 20/21 you need to declare it. You can carry forward losses from previous tax years as long as they were declared in time (see below).

If your gains are less than £12,300, but the total you sold in 2020/21 is more than £49,200, and you are registered for Self Assessment, you still need to declare it.

Losses must be declared to HMRC within four years of the end of the tax year in which you made the loss, if you want to be able to claim against them in the future.

underground99

Type_45 said:

As I say, my "gains" £8385. 

What you said was, "I've sold £8385, and then bought £2605".  So 'sold £8385' means 'made capital gains of £8385' ? Meaning the sales proceeds were £8385 higher than the purchase cost? Does that mean the 'bought' means 'made losses of', or literally bought something?


I did read somewhere (on this forum) that you don't need to declare capital gains below £12,400 if you don't do a self assessment tax return. But if you DO do a self assessment tax return then you must mention it.

If you are doing a self-assessment, the instructions to the form should tell you that you should fill out the capital gains pages if:
- your gains (before deducting any losses that you want to claim against the gains to reduce the net gain) exceed the exempt amount of £12300; or
- you sold assets worth over £49200 (four times the annual exempt amount) even if your gain wasn't over the exemption.

If you had a  whole bunch of buys and sells over the year, you might have more than £49200 of total sells even though the overall gains were below £12300.

Malthusian

Bemr said:

If you paid more than 8385 originally and sold them at a loss then I believe you can register the loss with HMRC and carry it over as extra tax free allowance for future years in case your future gains are above £12,300.  At least that’s how it works for shares.  I don’t know if that can be done using SA.

If you're registered for SA you declare your losses via the usual CGT section. If not you can send HMRC a letter.

As for repurchasing Bitcoin after selling some, not sure if the 30-day rule applies in the same way as it does for shares

An interesting one. Professor Google says it does, but the HMRC guidance is clearly written in a pre-crypto environment and only mentions "shares and securities".

I would assume that Bitcoin is a security for this purpose, on the grounds that it creates taxable gains and losses like a security, can be rapidly traded like a security, and generally quacks like a security; it is the kind of thing that the "bed and breakfast" rule was specifically designed for.

(Investopedia defines a security as something that comes with either ownership rights over an asset or a creditor relationship, which excludes crypto tokens. Likewise Dictionary.com defines "security" in this sense as "stocks and bonds". But we are interested in what HMRC would think.)

*edit* In an attempt to get chapter and verse, I even looked at the original CGT legislation, but the 30 day rule seems to exist only in the HMRC tax manual.

underground99

Malthusian said

As for repurchasing Bitcoin after selling some, not sure if the 30-day rule applies in the same way as it does for shares

An interesting one. Professor Google says it does, but the HMRC guidance is clearly written in a pre-crypto environment and only mentions "shares and securities".

I would assume that Bitcoin is a security for this purpose, on the grounds that it creates taxable gains and losses like a security, can be rapidly traded like a security, and generally quacks like a security; it is the kind of thing that the "bed and breakfast" rule was specifically designed for.

(Investopedia defines a security as something that comes with either ownership rights over an asset or a creditor relationship, which excludes crypto tokens. Likewise Dictionary.com defines "security" in this sense as "stocks and bonds". But we are interested in what HMRC would think.)

They do have some crypto-specific guidance which clarifies that it works the same as investments like shares, where your tokens of the same type (e.g. a pile of bitcoins versus a pile of another type of coin) would sit in their own separate pool of assets for working out the average price paid; with the sales price generally being compared to the average price paid for that pool to work out the gain unless it needs to be matched to a sameday purchase or 'within 30 days' purchase instead.
https://www.gov.uk/guidance/check-if-you-need-to-pay-tax-when-you-sell-cryptoassets

Type_45

Just to clarify:

I entered the 20/21 tax year with about £7,000 worth of crypto currency. I'd been holding/HODLing this crypto for years as it had depreciated drastically.

But when, during the 20/21 tax year, the value went up, I sold all of it for £8385. 

But then I re-bought £2605 during the 20/21 tax year.



I haven't done a self assessment tax return in many years, but I need to do one this year as my rent a room scheme income has gone slightly over £7500 (it's about £9,000).

Therefore I'd like to know if I also need to declare the crypto.

eskbanker

Type_45 said:

Just to clarify:

I entered the 20/21 tax year with about £7,000 worth of crypto currency. I'd been holding/HODLing this crypto for years as it had depreciated drastically.

But when, during the 20/21 tax year, the value went up, I sold all of it for £8385. 

But then I re-bought £2605 during the 20/21 tax year.

That doesn't really clarify!

When assessing capital gains, it's the original acquisition cost that matters, not the value at the start of a tax year, so your £7K figure is irrelevant.

Likewise, the matching rules applied to subsequent repurchases require detail of the timescale between selling and rebuying, so if your £2,605 purchase was of the same assets and within 30 days then that affects the CGT calculation.