Despite the recent cryptocurrency market decline, investors in the United Kingdom may be able to “bank” their cryptocurrency losses to lower their taxable income.
Crypto assets are not subject to the same level of oversight by HM Revenue, and Customs (HMRC) in the United Kingdom as fiat currency, since HMRC does not differentiate between cryptocurrencies like Bitcoin and other assets like stocks and shares.
Many investors are worried as a result of the recent decline in the market, but according to a regulation implemented by HMRC, many can make plans for the future and lower their tax burden to prevent losing even more money, according to a report published on May 16 in the Express.
Investors have the chance to offset losses
Indeed, investors may be able to “bank” previous crypto losses with the tax office in order to offset the effect of future profits.
Paul Webster, a director on the Private Client Tax team at Kreston Reeves, provided an overview of how the HMRC perceives cryptocurrency and how individuals might reduce their potential future tax liabilities.
Mr. Webster elaborated:
“For the last few years, crypto investors have had to worry about tax liabilities on sale following dramatic increases, but now the tide has turned.”
“Few investors realize that losses can be banked with HMRC and offset against future gains.
In the eyes of HMRC, the sale of crypto assets is a disposal, and hence subject to capital gains taxes of 20%. While this is true for many investors, losses on sales may be used to offset profits on other assets like investment property in the future.
Due to the four-year statute of limitations, damages must be claimed by April 5, 2027, if they were realized in May 2022. Crypto assets are eligible for the UK’s yearly capital gains allowance of £12,300 ($15,078).