Capital Gains Tax on crypto withdrawals

rundmc-k

Hello, I invested about 6k in crypto in
 20/21, and made a profit of around 10k. I changed it all into Tether (cryptocurrency tied to the US dollar) back in 2021 and left it in the exchange/wallet. 

I now want that money into my bank account. My question is about avoiding Capital gains tax. I know the profit limit is 3k before you start paying CGT, so can I...

- Withdraw ~9k without CGT (6k investment + 3k profit) 
or 
- Withdraw it all CGT-free as the profit was made in 20-21 when profit limit was about 12.5k
or
- Something else entirely

I would appreciate any help. 
Many thanks

gravel_2

I could be wrong but... the CGT event was when you exchanged your crypto for USDT. You've missed your window to game the allowance and would have failed to report your gain to HMRC.

https://www.gov.uk/hmrc-internal-manuals/cryptoassets-manual/crypto22100

The good news is the CGT annual exempt amount at that time was £12,300 so there should be no tax if your net gain was only £10k. 

rundmc-k

Thankyou for your response. It's good to know the CGT event was the point that I changed crypto into USDT.

Missing my window to game the allowance... does this mean, for example, sending some to my wife to use her CGT allowance? So if I sent £3k USDT to an account set up in her name now it wouldn't count as a gift?

flaneurs_lobster

 gravel_2 said:

I could be wrong but... the CGT event was when you exchanged your crypto for USDT. You've missed your window to game the allowance and would have failed to report your gain to HMRC.

https://www.gov.uk/hmrc-internal-manuals/cryptoassets-manual/crypto22100

The good news is the CGT annual exempt amount at that time was £12,300 so there should be no tax if your net gain was only £10k. 

Forgive an entirely naïve question, why does exchanging crypto for Tether, another crypto currency/coin, become a withdrawal for CGT purposes? I thought the crypto (whatever flavour) had to be converted into Proper Money for this to happen.

gravel_2

"Crypto" isn't a tax wrapper every time you exchange one token for another token you are exchanging one thing of value for another thing of value which triggers potential CGT liability. This will result in a capital gain or loss, even if the impact is not directly tied to GBP in your pocket until you eventually liquidate for fiat. The guidance makes this very clear.

@flaneurs_lobster

Bookworm105

flaneurs_lobster said:

 gravel_2 said:

I could be wrong but... the CGT event was when you exchanged your crypto for USDT. You've missed your window to game the allowance and would have failed to report your gain to HMRC.

https://www.gov.uk/hmrc-internal-manuals/cryptoassets-manual/crypto22100

The good news is the CGT annual exempt amount at that time was £12,300 so there should be no tax if your net gain was only £10k. 

Forgive an entirely naïve question, why does exchanging crypto for Tether, another crypto currency/coin, become a withdrawal for CGT purposes? I thought the crypto (whatever flavour) had to be converted into Proper Money for this to happen.

explains it in that link