In the UK, there isn’t a fixed amount of cryptocurrency you can cash out tax-free. It depends on whether you make a capital gain and your overall tax situation.
Here’s how it generally works:
- Selling crypto for pounds (GBP) is usually a taxable disposal for Capital Gains Tax (CGT) purposes.
- You pay tax on the gain (the increase in value since you acquired it), not on the total amount you cash out.
- If your total taxable gains for the tax year are within your available annual exemption (if any), you may not owe CGT. Note that the UK’s CGT annual exempt amount has been reduced significantly in recent years, so many people now have only a relatively small tax-free allowance. Tax rules can also change between tax years.
- If your gains exceed the exemption, the amount above it may be taxed at the applicable CGT rate, depending on your income and the type of asset.
For example:
- You buy crypto for £8,000.
- Later, you sell it for £10,000.
- You have a £2,000 capital gain.
- Whether you owe tax depends on your available annual exemption and any other gains or losses you’ve made during the tax year.
Keep in mind:
- You should keep records of all crypto transactions, including purchase dates, costs, sale proceeds, and any fees.
- Exchanging one cryptocurrency for another (e.g. Bitcoin to Ethereum) is also generally a taxable disposal.
- If you’re trading crypto as a business rather than investing, different tax rules (such as Income Tax) may apply.
