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Let’s talk crypto! It’s cool, it’s innovative, and it’s one of the few things that isn’t fully-regulated by the government. But does that mean you can avoid paying the tax you owe?
Uh-uh. 🙅
In the UK, crypto is very much subject to tax. And if you owe it, you can’t avoid paying it! But there are a few ways you can navigate the dreaded ‘crypto-tax’ (without getting on the wrong side of HMRC, of course).
First things first, you won’t have to pay tax on your crypto profit if it falls below a certain amount.
👉 For capital gains tax (CGT), the threshold is £3,000 in the tax year 2024/2025, halved from £6,000 in the 2023/24 tax year. So if you sell or exchange, you only pay capital gains tax on the profit that’s over this amount. Want to know the current CGT rates? Have a look here.
👉 If you’re day trading for short-term profit and become liable for income tax, the threshold is £12,570 before you have to pay. This is your personal allowance.
Capital losses aren’t all bad news. You can offset them against your capital gains to reduce your overall tax liability, which includes using them to bring you back within your tax-free CGT allowance. Better still, if you’ve only got losses, you can carry them forward to offset against gains in future financial years, provided you register them with HMRC.
Many UK investors use a crypto portfolio tracker (like Koinly!) to track their unrealised losses – that is crypto in their portfolio that is underperforming, but not yet sold, swapped or spent – and harvest them to realise their loss and offset them against their gains. This is known as tax loss harvesting.
You can use Koinly to track both your realised and unrealised gains and losses on both a portfolio and individual asset level, allowing you to optimise your tax position ahead of the end of the financial year and pay less tax.
Sign up free today to optimise your tax liability.
Coupled up? Great! Because this is one way to avoid paying capital gains tax on crypto. Yep, you read that right! You can give your spouse crypto without having to pay tax on the profit.
However, there is one condition:
Crypto peeps 🤝 landlords = being able to claim a £1,000 allowance.
The Trading Allowance means you can earn up to £1,000 from self-employment without having to pay tax on it. And if you have rental income as well as crypto income, you’ll be able to claim both, making your total tax-free allowance £2,000. 🤩
The best part? There’s no long, tedious process to claim this allowance. You’re not required to report your income to HMRC if it’s under the threshold. That’s it. 🕺
If you’ve raked in some extra cash from crypto, and you’re thinking about investing in a small business, here are some of the tax reliefs you may be entitled to:
Don’t forget: no investment is without any risk. Be sure to do as much research as possible and get financial advice if required.
Donating to charity is never a bad idea.
So if you’ve made extra profit from crypto,donating crypto to a registered charity means you can either lower your CGT bill or you won’t be liable for capital gains tax altogether.
Again, there are a few requirements:
If you’re paid fully or partially in crypto, you’ll have to pay income tax depending on how much you earn.
Check with your employer and pension provider if you can pay some of your crypto into your pension instead of your bank account. Paying into your pension can act as a great tax relief. Read more on this topic here.
It can also push you one step closer to the retirement you’ve always dreamed of! 🤸
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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