UK taxpayers can offset cryptocurrency losses with future gains

The cryptocurrency market has not been performing well in recent weeks following the collapse of Terra LUNA and UST. The collapse of these two tokens spooked investors and caused massive liquidations across the charts.

While the market shows a slight sign of recovery, investors have suffered massive losses. The recent selloff has erased the total gains made by the cryptocurrency market in 2021.

UK crypto investors can offset losses with future gains

In Britain, cryptocurrency investors can sigh relief after the HM Revenue, and Customs (HMRC) announced that cryptocurrency losses could be offset using future crypto gains. HMRC is a non-ministerial department within the UK government responsible for collecting taxes.

HMRC said that in matters to do with taxation, it viewed cryptocurrencies such as Bitcoin in the same manner as equity investments. Paul Webster, a director at Kreston Reeves in the private client tax team, said that investors would no longer be worried about tax liabilities related to cryptocurrency investments.

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Webster said that cryptocurrency investments, including “losses can be banked with HMRC and offset against future gains.” He added that the HMRC viewed cryptocurrency gains as a form of capital gains with this move, where the tax payable was equivalent to 20%.

Therefore, the losses made following crypto-related investments can be deducted from the future gains in capital gains realized from other investments such as property. Webster also said that the move of disposing of some digital assets could cost more than their value, and to avoid losses, investors could do nothing.

The HMRC also said that negligible value claims could be taken forward while maintaining eligibility to offset future gains. Every UK investor is eligible for an annual capital gains allowance of £12,300, which will apply to cryptocurrency investors. Investors are also allowed to give out the assets of their spouses and civil partners to avoid receiving a capital-gain tax that would double the available tax-free gains annually.

A rise in crypto taxes

Governments worldwide have doubled efforts to collect taxes related to cryptocurrency investments. The GST council, which is the Indian tax authority, is currently debating over the 28% GST tax on cryptocurrency gains in India.

With this tax, India will be taxing cryptocurrencies like the lottery, gambling, casinos, and horse racing. This will classify cryptocurrencies to be speculative assets.

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