Crypto Tax Year End Planning Tips

As we near the end of tax year, below are some tips and guidance to assist you in being proactive in managing your crypto tax liability. Transactions will need to be executed by 5 April 2024 to fall into the 23/24 tax year. It is recommended you seek bespoke tax advice for your circumstances before implementing these tips.

Crypto tax planning tips

• Crypto tax software – using software, such as our recommended partner Recap.io, is essential for calculating your crypto income, capital gains and losses for each tax year. Bringing your crypto book-keeping up to date is a necessary first step before you can consider pro-active tax planning.
• Tax loss harvesting – intentionally trigger disposals of crypto or NFTs standing at a tax loss, to offset capital gains in the same tax year or to carry forward for future use – for more details see our article on Cryptoasset Tax Loss Harvesting.
• Double your CGT annual exemption – using your spouses’ capital gains tax (CGT) exemption of £6,000 as well as your own, by transferring crypto to the spouse to dispose of. The transfer to your spouse is CGT free.
• Splitting disposals over two tax years – to take advantage of two years’ CGT annual exemption (although it reduces to £3,000 from 6 April 2024).
• Timing around low income levels – splitting capital gains over two tax years, or crystallising the gains in a tax year with lower income. This can help reduce the CGT rate applied to part of the gains (from 20% to 10%), if the taxable income is less than £50,270.
• NFTs not subject to bed & breakfast rules – as NFTs are not subject to the pooling rules, the 30 day matching (bed & breakfast) rules do not apply. Therefore you could sell an NFT standing at a loss to a 3^rd party, bank the loss to offset against gains in the same tax year and then buy it back.
• Charitable donations of crypto – making a donation of crypto to a qualifying EEA charity is a no gain/no loss disposal for CGT purposes, so no tax is payable. Donations of crypto do not qualify for gift aid income tax relief.
• Invest in a small business – investing in certain companies through The Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS) could make you eligible for significant income tax relief and CGT deferral relief/exemptions.
• Transfer income yielding crypto – if your other income is high, consider transferring income yielding crypto to your spouse (if they have a lower annual income level) or into your own Limited Company – for more details see our separate article on Cryptoasset Tax Loss Harvesting.

Crypto tax traps to avoid

• Bed & breakfast matching & pooling rules – ensure you understand the matching and pooling rules, so you realise the intended gain or loss. Selling crypto and buying it back within the next 30 days will likely result in very little gain/loss as the ‘re-purchase’ price will be deducted from the disposal, rather than the S104 pool average cost.
• Don’t waste your CGT annual exemption – capital losses are automatically set against capital gains in the same tax year, therefore potentially up to £6,000 of capital losses may be wasted. Ideally restrict the losses realised to leave £6,000 capital gains to be offset with the CGT free exemption.
• Gifts are mostly taxable – whereas spouse and charitable gifts are tax free, a gift to any other person/party is subject to CGT. The market value at the time of the gift is treated as the disposal proceeds, resulting in a capital gain/loss. Where the gift was to a connected party, any loss made is ring-fenced and cannot reduce your other gains. It can only be set against gains on other disposals to the same person.