Traders who have sold or exchanged cryptocurrency may be required to pay Capital Gains Tax (CGT), HM Revenue & Customs (HMRC) has warned.<\/p>\n
It comes after the tax authority wrote to holders of cryptoassets, such as Bitcoin, reminding them of their legal obligations.<\/p>\n
According to the letter, you must pay CGT if your total gains arising from all disposals in a tax year are over the annual exempt amount \u2013 currently \u00a312,300. The allowance is not exclusive to cryptocurrency, meaning it is shared across all other assets, such as shares in a company or property.<\/p>\n
A \u201cdisposal\u201d is defined as the sale of cryptoassets for fiat currency, such as pounds or dollars; the exchange of one cryptoasset for another, such as the conversion of Bitcoin to Ether; or using cryptoassets to buy goods or services.<\/p>\n
For CGT purposes, the gain is usually the difference between what you paid for an asset and what you sold it for or the value at exchange.<\/p>\n
Losses, however, can be used to reduce the CGT due on other gains.<\/p>\n
HMRC advises holders of cryptoassets to review their transactions, calculate their gains and\/or losses, and complete a Self Assessment tax return if necessary.<\/p>\n
If gains were made in previous tax years, the trader should complete a disclosure using the Digital Disclosure Service.<\/p>\n