With Cryptocurrency on the rise there exists the common misconception that one does not need to pay taxes on profits made from trading in cryptocurrencies. Unfortunately, this is not the case.
Most people will have to pay capital gains tax on the profits made through the trading of cryptocurrencies.
The biggest challenge when dealing with crypto is keeping track of all your trades – especially if you have exchanged your crypto.
A big challenge when dealing with crypto is making sure that you have an audit trail with all your trades because sales are not only recognised when you sell crypto for fiat but also when you exchange one cryptocurrency for another.
It is important to remember that you shouldn’t only record the gains that you have made, but also ensure that you keep a record of your losses, so that you are able to offset your losses against capital gains made within the year and for losses to be carried forward and to be offset against capital gains made in the future years.
Calculating your capital gains (and capital losses) correctly on your personal tax returns.
Keeping track of all HMRC updates for the latest guidance and tax treatment of crypto-related.
Keeping track of all losses brought forward and ensuring that you are making use of your capital gains tax allowances in the most tax-efficient ways.