Selling crypto over next year or two

inversions

Hi,

I know that HMRC count selling crypto as capital gains but for the life of me I can't work out how they take into account how much it cost to buy. Or if they even bother and just count the total value of what's sold as capital gains to be taxed?

Anyone tell me cos I can't find the info. TIA!

Keep_pedalling

The same with any other CG, it is down to you to calculate you gains and declare them.

inversions

Well for instance my records go back to May 2014. and I can see I bought 10000 DOGE for £3.04. Do I have that DOGE today? No, I never really believed any crypto would become really valuable one day. So I was careless. That 10k DOGE is only worth about £720 atm but it's gone.

Also between August 2014 and Feb 2015 my records show I purchased a total of 3.1542 BTC for about £380. That's worth £150k ish today after commission. My records show that much of this has been lost, stolen or confiscated since. My current BTC holding is a little under 0.8 and is worth ~£37k. My last purchase was for 0.025BTC for £1075.64 which is now sellable for £1180.94. How is that worked out? Given that there are no records anywhere of my converting the BTC to another coin or selling a single bit. And I'm not saying that because I think I've covered my tracks. It's actually true.

masonic

You don't need to include any that is gone, lost, stolen, or confiscated (??) as you won't be selling it. If most of your remaining BTC originated from the purchase at £120/BTC, then the vast majority of the £37k is capital gain. Take that as your starting position, which it may be possible to improve if you have the records to support it.

inversions

Well I have records that show I purchased a total of £40,147.95 of crypto from May 2014 to a week ago. In that time I have sold only a bit over £700 of LTC (about 7 years ago). I also purchased a number of alt coins during this period, including the DOGE mentioned above. All except the DOGE and LTC were busts (the coin has stopped existing) and I lost the DOGE. My current crypto holdings are valued at £43,524.98 (before the transaction fees) which yields a profit of £3,395.03 pence over almost 10 years. Which is below next years capital gain threshold of £6k.

So to me I've scraped a profit of about 3k after commission. But do HMRC look at it that way?

inversions

masonic said:

You don't need to include any that is gone, lost, stolen, or confiscated (??) as you won't be selling it. If most of your remaining BTC originated from the purchase at £120/BTC, then the vast majority of the £37k is capital gain. Take that as your starting position, which it may be possible to improve if you have the records to support it.

Confiscated because the US DEA took over a website that sold illegal drugs and duty free tobacco etc. I was new to the game. NEVER leave more than a few quid on a dark net market. Cos things like that happen.

inversions

masonic said:

You don't need to include any that is gone, lost, stolen, or confiscated (??) as you won't be selling it. If most of your remaining BTC originated from the purchase at £120/BTC, then the vast majority of the £37k is capital gain. Take that as your starting position, which it may be possible to improve if you have the records to support it.

Trouble is I don't have exact figures for what is lost. I know that in 2016-17 I didn't hold any crypto at all (that isn't lost). So I would argue that the most recent purchases are the ones that should be considered. So the last purchases of BTC that adds up to what I have in my wallet is very roughly 1.02 BTC acquired at £16.23k. I have under 0.8 BTC with a pre commission sale value of £38.3k. So given that I believe it would be acceptable to sell that over the course of 8/9 years (assuming Capital Gains don't go back up, shorter if it does, maybe) then I won't have to pay capital gains? I think?

masonic

inversions said:

masonic said:

You don't need to include any that is gone, lost, stolen, or confiscated (??) as you won't be selling it. If most of your remaining BTC originated from the purchase at £120/BTC, then the vast majority of the £37k is capital gain. Take that as your starting position, which it may be possible to improve if you have the records to support it.

Trouble is I don't have exact figures for what is lost. I know that in 2016-17 I didn't hold any crypto at all (that isn't lost). So I would argue that the most recent purchases are the ones that should be considered. So the last purchases of BTC that adds up to what I have in my wallet is very roughly 1.02 BTC acquired at £16.23k. I have under 0.8 BTC with a pre commission sale value of £38.3k. So given that I believe it would be acceptable to sell that over the course of 8/9 years (assuming Capital Gains don't go back up, shorter if it does, maybe) then I won't have to pay capital gains? I think?

All you need to know is three numbers. (1) Your average acquisition unit price A, which can be a worst case value if not known, (2) the number of units you sold U, and (3) your sale unit price P. From these you can calculate your gain as U x (P - A).

A cannot be made up selectively from your most recent purchases, it must take into account your entire holding. Your coins are fungible, so you cannot selectively sell those you paid the most for. If you are now saying that all of the 3.1542 BTC you purchased up to Feb 2015 was lost/confiscated/stolen to wipe out your holdings completely, then you can ignore that and consider all purchases since then, otherwise only exclude the amount you can prove is irretrievably lost (for example, if can prove that 2.5 BTC was irretrievably lost in March 2015 (e.g. a theft that you reported as a crime) when you held a total of 3.1542, then include 0.6542 BTC purchased at £120 per unit in your average). Otherwise include the whole 3.1542 BTC in your average.

inversions said:

Confiscated because the US DEA took over a website that sold illegal drugs and duty free tobacco etc. I was new to the game. NEVER leave more than a few quid on a dark net market. Cos things like that happen.

Assets you transferred to an illegal marketplace run by criminals without getting any goods in return should not be factored in to your CGT calculations. You cannot use this fact to reduce your average acquisition price.

Assuming you did only need to consider the 1.02 BTC you mention (this now seems unlikely), then your rough figures suggest A is about £15.9k and P is £47.9k.

To make a non-taxable gain in the 2023/24 tax year then £6k = U x £32k, so U = 0.1875 or 23% of your holding. In the 2024/25 tax year, the allowance halves so you'll be able to sell about half as much, also depending on the price movement. After that it is too difficult to say what will happen to both the CGT allowance and price of your crypto, so you'd have to take it one year at a time.

Otherwise, it looks like you'll be selling from a pool of 4.1742 BTC acquired for £16.27k (A = £3.9k), and you'll only be able to sell 0.1363 BTC this year or 17% of your holding.

mooneysaver

HMRC have confirmed as long as you convert to ADA and hold for more than 180 days in a tax year before selling there will be no CGT arising. Search section 751 (b) instrument for the full details

masonic

The only Section 751 (b) I could find was a regulation by the IRS in America concerning the conversion of ordinary income into capital gains through the sale of partnership assets. The only Section 751 referenced by HMRC I could find is Section 751 of the Income Tax (Trading and Other Income) Act 2005, which is concerned with interest payable on personal injury claims. Perhaps you could clarify the "instrument" to which you are referring?

noitsnotme

ADA is the Cardano cryptocurrency but I can’t see HMRC saying that a specific currency is exempt from CGT under any circumstances.  Sounds more like something you hear from the bloke down the pub, unless mooneysaver can present further evidence.