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Can you cash out crypto tax-free?

  • 2 min read
  • Last updated 16 Apr 2024

If you make a profit from trading Bitcoin, Litecoin, Ethereum, or any other cryptocurrency, then you might want to know if you can cash out crypto tax-free. Crypto trading is becoming more and more popular, especially with younger traders who are keen to start their first investment portfolios. 

However, although these crypto assets have the potential to make you lots of money, it doesn’t mean that they’re not subject to tax. HMRC might not deem crypto to be actual money, but they still see it as a type of personal investment. Like property or shares, any profits you make from buying or selling crypto is taxable.

What is crypto?

Crypto, or cryptocurrency, is a form of digital asset that can be used online for the exchange of goods and services. 

There are more than 6,700 different cryptocurrencies that are being traded publicly. Some of the most popular types of crypto include:

  • Bitcoin
  • Litecoin
  • Tether
  • Cardano
  • Bitcoin Cash
  • Ethereum
  • Zcash
  • Stella Lumen

Why is crypto becoming so popular to trade?

  • Crypto is believed to be the currency of the future. Many people are investing in them, and buying and selling different types for profit. Some are buying them now before they become more valuable.
  • Most cryptocurrencies remove the central banking element from managing money supplies. Over time, banks usually reduce the value of money via inflation. This doesn’t happen with crypto.
  • It’s more secure. Crypto uses a technology called blockchain, which is a decentralised processing and recording system that is thought to be more secure than traditional payment methods.
  • Some people are using crypto as a way to move money more cheaply and easily.

Because of these reasons, the value and potential of crypto is increasing. As a result, more and more traders are looking to invest in crypto to make profits and increase their investment portfolios.

Why can you not cash out crypto tax-free?

At different points in its thirteen year history, crypto has fluctuated in value. For example, anyone who bought Bitcoin in 2008 when it was worth fractions of a pound could potentially have made hundreds of millions of pounds in profit in 2021 when its value hit around £40,000. 

Crypto trading has a reputation of being like gambling, but unlike gambling, you’ll most likely be liable to pay tax on your profits.

If you hold crypto as a personal investment, you’re liable to pay Capital Gains Tax on any profit you make from them. You’ll only pay CGT on the profit above your Capital Gains Tax allowance, which is £3,000 for the 2024/25 tax year. It was previously £6,000 in the 2023/24 tax year. Plus, you could be subject to other taxes depending on your situation.

tax on crypto 2024/25

If your crypto profits exceed the Capital Gains Tax allowance, you’ll have to pay tax at the following rates:

Your situation

Outlined number oneImage of an arrow
How did you make money?
Profit from capital gains
Annual salary
Other income

Tax and profit

Outlined number two
  • Your profit from
    £3,000 tax-free CGT allowance
  • Capital Gains Tax to pay
  • Profit after tax

How your capital gains tax is calculated

The total capital gains tax (CGT) you owe depends on two things:

  • How much you earn in total
  • What type of assets you sell

Your overall earnings determine how much of your capital gains are taxed at – 10% or 20%.
Our capital gains tax rates guide explains this in more detail.

In your case where your capital gains from shares were £20,000 and your total annual earnings were £69,000:

Capital gains tax (CGT) breakdown

You pay no CGT on the first £3,000 that you make

You pay £127 at 10% tax rate for the next £1,270 of your capital gains

You pay £3,146 at 20% tax rate on the remaining £15,730 of your capital gains

Tax bill amount £3,273
I want to pay by
Savings frequency

You need to save

£4.91 per day

to pay your £3,273.00 tax bill by 31/1/2026 which is in 666 days

What happens if I don’t declare my crypto profits to HMRC?

You might be surprised to know that the penalties for not declaring your crypto profits can be very severe!

The UK was actually one of the first countries to introduce tax on crypto assets. HMRC is very active in tracking down cryptocurrency tax avoiders, and they’ve even started working with crypto platforms to do this. Coinbase recently handed over information on UK customers who made more than £5000 worth of cryptocurrency between 2017 and 2019 to HMRC. 

It’s important to understand that HMRC will not stop its pursuit in finding crypto tax avoiders, so it’s best to be proactive and report and pay your tax in time to avoid any late penalties and further prosecution.

Filing a crypto tax return?

Well, listen up. We teamed up with Koinly to bring you a quick and easy solution: a tool to create crypto tax reports. Want to get your crypto tax report generated and tax return filed all in one? Look no further. Up to 1000 transactions totally free!

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