With the recent reduction of the annual exempt amount for capital gains tax (CGT), it's important to understand your options for reporting gains and potentially reducing your tax liability. Luckily, HMRC's real-time CGT service can help you do just that.
What is HMRC's real-time CGT service?
HMRC's real-time CGT service is an online platform that allows individuals to report gains on assets outside of self-assessment. This includes gains on cryptoassets, which have become increasingly popular in recent years. The service is only available to UK residents and cannot be used by agents on behalf of clients.
How can you use the service to report gains on cryptoassets?
To use the real-time CGT service, you will need to sign in with your government gateway user ID and password. You will then be asked to provide information about the disposal of your cryptoassets, as well as your calculations of the gain. Once this information has been submitted, HMRC will send you a letter or email with a payment reference number.
What are the deadlines for reporting gains and paying taxes?
If you made a gain on a cryptoasset in 2023/24, you must report it by the 31st of December 2024 and pay the tax by the 31st of January 2025. For gains made in 2024/25, the deadline for reporting is the 31st of December 2025 and the deadline for paying taxes is 31st of January 2026. It's important to note that these deadlines may change in the future, so it's best to check with HMRC for the most up-to-date information.
Why should you consider using the real-time CGT service?
The main benefit of using it is that it can save you time and potentially reduce your tax liability. By reporting gains outside of self-assessment, you can avoid the hassle of having to submit a tax return solely for the purpose of reporting a gain. Additionally, by reporting the gain in real time, you may be able to take advantage of any tax planning opportunities to reduce your overall tax liability.
How can you calculate a capital gain on cryptoassets?
Calculating a capital gain on cryptoassets can be a complex process, but in a nutshell, you will need to calculate the difference between the purchase price and the sale price of the cryptoasset, taking into account any allowable costs such as transaction fees. It's important to keep accurate records of your cryptoasset transactions to ensure you report the gain correctly.
What are the limitations of using the real-time CGT service?
While it can be useful for reporting gains on cryptoassets, it has some limitations. For example, it cannot be used to report gains on UK residential property, foreign tax credit relief for overseas property, or chargeable event gains for life insurance. Additionally, the service is only available to the taxpayer and not their agent.
Make sure to keep accurate records of your cryptoasset transactions and stay up-to-date with any changes to the reporting and payment deadlines. By utilising this service, you can maximise your tax savings.
And that means staying compliant with HMRC's regulations.
Until next time ...
ROGER EDDOWES Business Godparent
Would you like to know more?
If anything I've written in this blog post resonates with you and you'd like to discover more about reporting gains on your cryptoassets, it may be a great idea to call me on 01908 774320 and let's see how I can help you.
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Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.
Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.
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