Trading in crypto-currencies such as Bitcoin and Litecoin is treated by HMRC as the same as dealing in shares and bonds.

The gains and losses made on those transactions are taxable as capital gains or capital losses, and they need to be reported on your tax return if the total amount of proceeds is more than four times the capital gains (CGT) annual exemption. For 2017/18 the CGT annual exemption is £11,300, so where the total value of all capital transactions in the year is £45,200 or more, those gains/losses must be recorded.

It is quite possible for bitcoin trading to have exceeded £45,000 in 2017/18 as the peak value of one bitcoin on 11 December 2017 was $17,550 (£13,117). A gain or loss is made whenever a bitcoin (or similar cryptocurrency) is; exchanged for another one or for another asset, given away, or surrendered for payment in legal currency such as British pounds.

There are several aspects to consider when calculating gains made on cryptocurrencies:

  • All transactions must be calculated and reported in sterling.
  • Each type of cryptocurrency needs to be treated as a separate class of share and be “pooled” together;
  • The number of transactions in the year may be large, and there is unlikely to be a broker’s report which calculates the gains for you.

HMRC guidance on cryptocurrencies

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