FINANCE
With the price of crypto assets falling this year amidst the backdrop of the war in Ukraine and interest rate hikes, many investors in the digital asset market will now be sitting on significant losses. By Paul Webster, Private Client Tax Director at Kreston Reeves
Banking crypto investment losses with tax authorities Those hardest hit will the ones that entered the markets in late 2021 at the height of the bull run, and now find themselves underwater. Once a bear market sets in, it is inevitable that some cryptocurrency projects will not survive, leaving new investors licking their wounds. Some will panic and sell at a loss, whilst others will hold until there is virtually no value remaining. According to a survey in the US, 43% of males in the 18 to 29 age group have had some exposure to cryptocurrency investing. In the UK, the numbers are likely to be weighted more towards the younger generation. Whilst they may be astute when it comes to investing in this new asset class, many will have limited experience of tax rules, having never been required to complete a Tax Return, let alone make a loss relief claim. Many of the discussions centre around gains in crypto, but what can an investor do if they have made a loss?
❛❛ The acquisition and disposal
of crypto assets is generally subject to the Capital Gains Tax rules in the UK ❜❜ 42
Firstly, the acquisition and disposal of crypto assets is generally subject to the Capital Gains Tax rules here in the UK, unless the trading volume is so significant that it warrants being a trade. The difference in tax rates are considerable with capital gains taxed at up to 20%, and trading profits at up to 45% - with National Insurance on top.
