Claim tax relief to minimize cryptocurrency losses

The cryptocurrency market can be a volatile space, with the value of various cryptocurrencies changing rapidly. Recently, one such cryptocurrency, Luna, has seen its value drop from £66.80 to £0.000176 in a matter of days. While we cannot increase the value of a cryptocurrency, we can offer ways in which you can minimise losses with tax reliefs.

Disposal of cryptocurrency assets

By disposing of an asset, you can record a profit or a loss on it. “Disposing” of an asset means that it is no longer in your possession. There are multiple ways to dispose an asset, such as selling, trading, or in the case of theft and loss, receiving compensation such as an insurance payout. Before you can decalre losses on your cryptocurrency, first you must dispose of it.

Declaring losses on your cyrptocurrency

When decalring losses on your cryptocurrency, there are expenses which you can claim tax relief on. Firstly, the inital sum paid for the cryptocurrency and any transaction fees before its posting onto the blockchain. Also, any expenses to exchange a cryptocurrency for a different one and advertising fees incurred is claimable. Finally, any costs relating to the valuation of a cryptocurrency, including any software subscriptions, and professional expenses for either the purchase or selling of a cryptocurrency is eligible for tax relief.

Negligible value claim on cryptocurrency

Additionally, for cryptocurrencies with little to value, a negligible value claim can be made. A negligble value claim can be made on any assets that have become next to worthless. Doing so treats the assets as disposed of and realises a loss, even though you continue to be the owner. To do this, the cryptocurrency must be near worthless, and acquired prior to it losing its value. Additionally, you must own the assets when making the claim.

To make a negligible value claim, you will need to provide evidence that the cryptocurrency was owned by you at the time of making the claim. You will also need to show that it had lost value, no longer than 2 previous tax years before the tax year the cryptocurrency was bought (Note, a tax year starts April 6th and ends April 5th the following year).

To make a negligible value claim, you will need to submit a self-assessment with supplementary pages SA108. Enter the amount lost in box 19, and the code “NVC” in box 20.

To view the SA108 forms, click the provided here:

For more information follow the link here:

Backdating a claim

You can backdate a negligible value claim if you owned the crytocurrency and its value was lost. This can come in handy if you made profit on Capital Gains Tax the last 2 tax years, but not this tax year.

If you have cryptocurrency that you need to declare on your self-assessment, CIGMA Accounting is here to help. As tax accountants based in Wimbledon, we help customers who trade assets to make sure that your self-assessments are completed in the most tax efficient way. We also offer consultation calls to make sure you are making the most out of your assets.

Contact us today and receive a free quotation.