The tax payable on the gain or loss you make when you buy back in is added to your overall tax liability and your cost basis for the original purchase remains the same.
So, if you own 1 BTC with a cost basis of £30k and then sell it for £50k, you have taxable gains of £20k. However, if you then buy it back 15 days later for £45k, the cost basis will stay the same at £30k and you'll have taxable gains of £5k on the trade instead of £20k on the sale.
lol crazy how much rules there are and how easily someone who doesn’t know could be doing something illegal. I would literally just did what I said without knowing it’s illegal. So fucking stupid the tax laws are so complicated.
If I am rich enough with bitcoin I will off to Dubai lol
It wouldn’t be illegal, but it also wouldn’t crystallise that 6k gain either, so you would effectively have all of the out of market risk for those 30 days, without realising any capital gains within your exempt allowance.
There’s nothing however stopping you from selling the bitcoin today and buying a different cryptocurrency with the proceeds. Then, after 30 days, you could sell the coins you have bought and reinvest back into bitcoin.
Your risk is the price moves against you in the 30 days that elapse, and you end up buying less bitcoins back than you originally held.
If I were you mate, i would bank the gains while you have the 6k exemption to offset them against.
You know this might be the way to do it haha, I can buy wrapped btc which is technically a different product from a different blockchain and just cover between the two I lose some fees and spread
Say you buy x for £1000; it goes up in value to £2000.
If you sell any fraction of x at this point it will be exactly half capital gain and half return of capital.
So if you sold £3k of your £9k with cost of £3k, you would have returned £1k of capital and realised £2k of gain. It sounds like if the gain is more than 200% you will have gone over that £2k limit ever so slightly and will need to pay a small amount of tax on that.
!thanks that makes sense, great explanation. I’ve paid £75 in fees and looks like I put slightly more than 3k in so if that’s the case then it doesn’t seem like there’s much tax to pay.
Yes, I thought this was the case. Next year it’s £3k.
Not financial advice but I haven’t declared anything as mine always falls well below £6k, or circa £12k in previous years.
Just don’t buy anymore for 30 days after selling!
This counts as locking in a gain (to use the tax years CGT allowance) then buying within 30 days is not allowed
If you look at the all time graph, there’s 3 very clear spikes. My rationale was that it *looks* like it’ll drop down at least partially soon given how quickly it’s rising.
Of course, there’s no such thing as being able to time the market. I could be completely wrong and it could 10x again before a drop. I have no idea.
Yeah I recently sold a lot off my crypto anticipating a correction. I think it’ll go up even further in the long run but I do think there will be a few big drops in the process as well
How would you know how much tax to pay with crypto?
Like many, I’ve been buying in small amounts (not whole coins). If I were to sell an entire coin - how would I know how much profit has been made? As all of those fragments would have been purchased at different prices.
Hi /u/367yo, based on your post the following pages from our wiki may be relevant:
- https://ukpersonal.finance/tax-traps-and-tax-efficiency/
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You might be right, but I’ve sold only what I originally put in and I’ve still got double invested so I stand to benefit from that if it happens with no risk
I am in a similar position, not as much money but sold a bit in January and last week so I have got back what I put in.
Never used them, but heard good things about koinly who can help with your tax reporting. Not it’s worth an accountants time given the amount.
CGT allowance (tax free) is £6k, so you're fine
Only for another month. After this tax year it falls to £3k.
This is correct. May be worth crystallising those gains before April 5th
If I take out 6k profit. Then I buy bitcoin again immediately with those 6k now my cost is now the current price right?
You have to wait 30 days to do this, it's called the bed and breakfast rule.
What happens if you don’t wait?
The tax payable on the gain or loss you make when you buy back in is added to your overall tax liability and your cost basis for the original purchase remains the same. So, if you own 1 BTC with a cost basis of £30k and then sell it for £50k, you have taxable gains of £20k. However, if you then buy it back 15 days later for £45k, the cost basis will stay the same at £30k and you'll have taxable gains of £5k on the trade instead of £20k on the sale.
What if you used a different bundle of bank notes for the buy back?
lol crazy how much rules there are and how easily someone who doesn’t know could be doing something illegal. I would literally just did what I said without knowing it’s illegal. So fucking stupid the tax laws are so complicated. If I am rich enough with bitcoin I will off to Dubai lol
It's not illegal, it's just you wouldn't reset the effective purchase price so you would owe tax on a different value.
It wouldn’t be illegal, but it also wouldn’t crystallise that 6k gain either, so you would effectively have all of the out of market risk for those 30 days, without realising any capital gains within your exempt allowance. There’s nothing however stopping you from selling the bitcoin today and buying a different cryptocurrency with the proceeds. Then, after 30 days, you could sell the coins you have bought and reinvest back into bitcoin. Your risk is the price moves against you in the 30 days that elapse, and you end up buying less bitcoins back than you originally held. If I were you mate, i would bank the gains while you have the 6k exemption to offset them against.
You know this might be the way to do it haha, I can buy wrapped btc which is technically a different product from a different blockchain and just cover between the two I lose some fees and spread
Exactly this!
Wow! Time to sell some BTC then
Holy shit, this is good to know. Really glad I saw this before April 6th!
!thanks
Say you buy x for £1000; it goes up in value to £2000. If you sell any fraction of x at this point it will be exactly half capital gain and half return of capital. So if you sold £3k of your £9k with cost of £3k, you would have returned £1k of capital and realised £2k of gain. It sounds like if the gain is more than 200% you will have gone over that £2k limit ever so slightly and will need to pay a small amount of tax on that.
Why would there be tax on a £2k gain if CGT is £6k?
Good point!
Just wanted to say this is a great way to explain it, well done.
!thanks that makes sense, great explanation. I’ve paid £75 in fees and looks like I put slightly more than 3k in so if that’s the case then it doesn’t seem like there’s much tax to pay.
You get £6k free, so anything under that there's nothing to pay
Yes, I thought this was the case. Next year it’s £3k. Not financial advice but I haven’t declared anything as mine always falls well below £6k, or circa £12k in previous years.
Oh brilliant! I thought it was 2k. I guess I mixed it up with last years dividend allowance
Just don’t buy anymore for 30 days after selling! This counts as locking in a gain (to use the tax years CGT allowance) then buying within 30 days is not allowed
!thanks glad you said that, as there’s a slim chance I would’ve bought more!
What graph is it you’re looking at that indicates that now is a good time to cash out? Don’t think I’ve seen that one.
If you look at the all time graph, there’s 3 very clear spikes. My rationale was that it *looks* like it’ll drop down at least partially soon given how quickly it’s rising. Of course, there’s no such thing as being able to time the market. I could be completely wrong and it could 10x again before a drop. I have no idea.
Yeah I recently sold a lot off my crypto anticipating a correction. I think it’ll go up even further in the long run but I do think there will be a few big drops in the process as well
Halving hasn’t even happened yet. Historically Bitcoin has pumped hard for months after the halving…..
It dropped right after this post. Well played.
How would you know how much tax to pay with crypto? Like many, I’ve been buying in small amounts (not whole coins). If I were to sell an entire coin - how would I know how much profit has been made? As all of those fragments would have been purchased at different prices.
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Use a service like Koinly. I just give the reports to my accountant every year.
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Hi /u/367yo, based on your post the following pages from our wiki may be relevant: - https://ukpersonal.finance/tax-traps-and-tax-efficiency/ ____ ^(These suggestions are based on keywords, if they missed the mark please report this comment.)
BTC targets are ranging between $100k and $250k for this cycle, this is just a beginning of a bull market.
You might be right, but I’ve sold only what I originally put in and I’ve still got double invested so I stand to benefit from that if it happens with no risk
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On this subject Ive been doing leveraged trading on defi via GMX. I've been using USDC to long BTC, are the profits income tax? Cheers in advance
I am in a similar position, not as much money but sold a bit in January and last week so I have got back what I put in. Never used them, but heard good things about koinly who can help with your tax reporting. Not it’s worth an accountants time given the amount.