Gains On Crypto Are Taxed. Pass It On.
How is Crypto Taxed?
So, the bad news. The gains you may have made on that crypto is taxable, as a capital gain.
Sort of good news; if you made losses, you may be able to carry these forward to offset against future gains.
But, all is not lost; we all have a Capital Gains tax allowance each year. This year (21/22) it stands at £12,300 per person. Gifts between spouses are exempt and so there may be an opportunity to use 2x CGT allowances.
Your CGT allowance is a ‘lose it or use it allowance’ which cannot be carried into future tax years.
How useful is Crypto for Financial Planning?
About as useful as a chocolate teapot.
At MHFP we advise a range of City professionals, many with some form of crypto exposure.
It is currently impossible to include crypto exposure into their longer term planning because it is simply ‘too volatile’. When I say ‘volatile’, what I mean here is too risky. There is too much risk that valuations will never reach previous peaks. Many, far more insightful people than myself have mused that some currencies will end at £0. Crypto is no good for financial planning.
As such, perhaps the current market dip represents a good opportunity to reduce your crypto exposure, use your Capital Gains tax allowance and re-invest the proceeds into a more dependable and predictable asset class. If not already used perhaps even inside an ISA so that any gains grow tax free, or perhaps into a pension in order to receive tax relief at your highest marginal rate (this could be 60% tax relief!).
This is an opportunity to be tax efficient, sell off some gain and turn that speculative punt into something more meaningful for you.
Perhaps this is the ‘kick start’ your pension needs, or maybe a deposit on a holiday home, or even a pot of cash put aside for children’ s school-fees. Whatever is important to you, turning a highly volatile asset into a more stable and predictable asset goes some way to securing your financial future.
Start your plan, feel empowered!
Please note, pensions and stocks and shares ISAs are a complex area of legislation and you should seek financial advice to help understand what is suitable for you.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and the value may fall as well as rise. You may get back less than the amount invested.
The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.
Please note that none of the above should constitute financial advice.
Mansion House Financial Planning is an Appointed Representative of and represents only St. James’s Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority).