Hello, please preemptively forgive any errors I make based on my interpretation of both Capital Gains Tax and Crypto Tax from the 2018 document published by HMRC.
The plan for me is to make an amount of profit my goal. Let's say a nice round number like £50,000.
When you are not a Cryptocurrency trader (defined by HMRC as making numerous trades per day, every day, as your main source of income) you are then a speculator and any appreciation in your assets is taxed under Capital Gains Tax.
Capital Gains Tax has a tax-free income, which operates similarly to your personal income tax allowance. The Capital Gains Tax allowance is £12,300
Assumption #1 - the CGT tax-free income is separate to your Income tax allowance, meaning if I earned £30,000 salary then £12,500 (or whatever) is tax free, and likewise if I made £20,000 on Cryptocurrencies, or fine art purchase, then £12,300 is tax free. Is that correct?
Upon trading Cryptocurrencies back to Fiat, such as GBP or USD, this is a "taxable event" and you must then pay taxes if your income goes above the tax-free bracket.
So let's go back, I have made £50,000 in Cryptocurrencies hypothetically (fuck, I wish) and I want to cash out. Now, I also don't want to see 20% of £50,000-£12,300 go poof, so I want to effectively pay myself a supplemental, tax free income by staying inside the tax free bracket and converting £12,000 worth of Bitcoin or whatever back to GBP and into my bank.
I also don't want to hold my value in Bitcoin due to the volatility - what if it tanks?! So I'm thinking, trade to a stablecoin like DAI, USDC or (gulp) Tether, and then each year, snap off a portion to convert back to GBP under the tax-free limit and send to my bank.
Assumption # 2 - this is not taxable? Is this taxable?
PS, am aware that if you are in an engagement / marriage or living with a partner you can combine your CGT tax-free incomes.. That holds true for this scenario, right?
Thank you for your time!
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