According to a non-ministerial department of the UK government, HM Revenue and Customs(HMRC), British investors can now offset their losses against future gains in tax filings.
HMRC has previously said that it views cryptocurrencies in the way as equity investments.
According to Paul Webster, a director in the private client tax team at Kreston Reeves, crypto investors had to worry about tax liabilities on sale following a tremendous increase, however now, “losses can be banked with HMRC and offset against future gains.”
He further said that HMRC views crypto gains as “capital gains tax payable at 20%.” In reality however, several times a sale will be made at a loss, then “those losses can be used to offset future gains on other investments, such as investment property.”
Losses need to be claimed within four years of the end of the tax year within which they were realized.
Also several times, it so happens that the cost of disposing a crypto asset is more than the asset itself. In such situations the investors should do nothing to avoid additional losses.
According to HMRC, such a negligible value claim can be carried forward indefinitely while remaining eligible for future gains offset.
Every UK investor is granted an annual capital allowance of £12,300, which is also applicable to crypto investments.
Investors can give their assets to their spouses or civil partners without having to pay additional capital gain-tax, effectively doubling up the available tax-free gains each year.
This news comes as relief to UK investors considering the ongoing tribulations of the crypto market. The downfall of the LUNA and UST combined with rising interest rates and inflation, wiped out all the gains made by the crypto market since 2021.
