Disclaimer: This article is intended as an informative piece. This is not accounting or tax advice. Please speak to a qualified tax professional about your specific circumstances before acting upon any of the information in this article.

If you are classified as an investor rather than trader by HMRC (as the majority of cryptocurrency users are), the following rules apply:

  • If the net gain (after the offset of losses in the year) is more than the annual capital gains tax (CGT) exemption (currently £12,000 in 2019/20), the excess is subject to capital gains tax for a UK individual taxpayer; unless it can be reduced by capital losses brought forwards from a prior tax year
  • Brought forward losses can only be used if they have been declared to HMRC previously on a Tax Return or by letter
  • The exemption is across all capital gains in the tax year, so if you had gains or losses on other assets they should be taken into consideration. If the net gain is less than the annual CGT exemption, no CGT is payable

If you are classified as a trader by HMRC, income tax laws would apply. The exemption is £12,500 for the 2019/20 tax year. Other income should also be considered, as above.

You should take into account how capital gains is calculated for cryptocurrencies. It isn’t solely how much you have cashed out to fiat currencies. For example, if you purchased one bitcoin for £1000 and traded it for ethereum tokens when bitcoin was £14000, you would have the realised a gain of £13,000 on your bitcoin purchase – therefore you should calculate all of your taxable gains and losses and determine if you are over the exemption. 

Recap allows you to do allow of this and more, with automatic exchange integrations that allow you to gain clarity on your tax position in minutes.


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