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What constitutes a disposal of cryptocurrency for CGT purposes?
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What constitutes a disposal of cryptocurrency for CGT purposes?
In brief
- A disposal of a cryptoasset triggers a Capital Gains Tax calculation.
- A disposal covers more than selling for pounds.
- Swapping one cryptoasset for another, and spending crypto on goods or services, are both disposals.
- Moving your own crypto between your own wallets is generally not.
Why the definition matters
Capital Gains Tax is only due when there is a disposal. A person who buys crypto and holds it has no tax to pay until the point of disposal. Once a disposal takes place, the gain or loss is worked out by comparing the value at that time with the cost. Many investors are surprised to find that they have had several disposals without ever receiving pounds.
Typical disposals
The following are generally treated as disposals of a cryptoasset:
- selling it for pounds or any other currency
- exchanging it for another cryptoasset, including swapping one coin for another
- using it to pay for goods or services
- giving it away to someone other than your spouse or civil partner
For a swap or a purchase, the value of what you receive sets the proceeds. The value in pounds at that moment needs to be recorded.
Not usually a disposal
Buying crypto for pounds is not a disposal, it is an acquisition. Moving the same asset from one of your own wallets or accounts to another is not a disposal, although records should show it was a transfer and not a sale. A gift to a spouse or civil partner who lives with you is treated as made at no gain and no loss. Gifts to charity are also treated differently.
Matching rules
Where you hold several units of the same type of cryptoasset, HMRC requires them to be matched in a set order. Units sold are first matched against units bought on the same day, then against those bought in the following 30 days and then against a pool of the remaining units. The pool holds the average cost. This stops people selling and buying back immediately to create a loss.
Practical steps
Download the full transaction history from each exchange and wallet. Convert each transaction to pounds. Check that every swap has been picked up. A crypto tax software tool can help, but you remain responsible for the figures. Our page on cryptocurrency gives more detail.
Frequently asked questions
Is a crypto-to-crypto swap taxable?
It is a disposal of the asset you give up, so a gain or loss may arise.
Do I pay tax when I buy goods with crypto?
The purchase is a disposal of the crypto used, so yes, a gain may arise on the crypto.
What if I am unsure whether something is a disposal?
Take advice before reporting. Getting it wrong can mean tax, interest and penalties.
If you would like to talk this through for your own situation, please book a free call with our team.
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