Koinly
Here we go again with the sexy talk! Seriously though, with all the excitement around BTC shooting up and dragging a lot of alt coin prices with it, if you're thinking of "taking a profit" then I'd like to introduce you to a handy tool called Koinly to calculate your crypto taxes, which was brought to my attention by fellow Brit @gillianpearce. I'll be mostly talking to the UK crowd here so I can't speak for other country's local tax methods - you'll need to look in to it yourself and see if Koinly covers your country.
HMRC
What this online tool does is help you work out any taxes you owe from your cryptocurrency ventures. In the UK, HMRC have totally changed their tune from 2018 when cryptocurrencies were considered as gambling (so you paid no tax at all) vs today where literally everything is taxed! This includes crypto-crypto trading where disposing of ANY crypto is a taxable event, even on Hive-Engine... (full info on their Cryptoassets page here).
Good Housekeeping
If you've done a lot of trading, it can prove to be quite a challenge to keep on top of things but the sooner you get in to good practices, the more you can relax. I've mentioned about portfolio trackers before like Blockfolio but Koinly actually connects to your exchange accounts using something called an "API" which you get from your exchange - there's full instructions on this in Koinly. You can also sync with wallets and Koinly have made it really easy to link everything up.
KYC
In the UK, you need to give wallet information (even your hardware wallet) too as HMRC have chased all this information from Coinbase about UK customers so chances are, if you have an account with Coinbase, it's likely that you're on HMRC's radar. It is only a matter of time before they get details from other exchanges that require KYC in my opinion. Coinbase is a full "Know Your Customers" exchange where they keep records of which wallets you withdraw to. If there's any missing information regarding wallets, HMRC will consider it a disposal and so you're subject to CGT.
In the words of Captain Darling from Blackadder, "it simply says, "Bugger"".
Capital Gains Tax Threshold
The good news is that if you made any gains less than £12,300 in a tax year (April 6th - April 5th following year) then you don't have to pay any tax or fill out any forms at all. Hurray! More information about that in a really helpful and detailed guide on Koinly.
I am still going through all my exchanges and getting things set up but it is a LOT easier than trying to work things out yourself, particularly when it comes to the "pooling" calculations which no-one will understand unless you're actually an accountant as they are pretty complex, especially if you're dollar cost averaging!
I'm pretty sure that I'm not even close to the threshold with any of my trades given that they are so small but if prices start shooting up in any alt and the temptation to "cash out" is too great, at least I won't have to go back through everything to figure it out!
Changing Strategy
So whilst I get my head wrapped around all the different exchanges and time frames, I'll be changing my strategy a little bit and slowing down my own purchases just to organise all this stuff! The less frequently I make purchases and trades, the easier doing the taxes will be. Of course, I would rather be creating music, blogs etc than getting bogged down in admin but it has to be done! Thanks to some useful tips from @louisthomas in this video, it opened my eyes a bit more too.
Having never cashed out any crypto in 3 years though, maybe I'll just keep what I have until I really need it (I live by the mantra "don't invest more than you can afford to lose") and lend it out so it earns interest or stake it anyway but damn, even interest earnings are a taxable event! Think it's time to consolidate to BTC lol!
What are the crypto tax stipulations where you are? Have you tried out Koinly? Let me know in the comments below!
Tax care
Nicky
Referral Link for Koinly
- Sign up with the invite link
- Go for the Koinly Subscription (although you can use the free account for calculation purposes beforehand)
- You get $20 off the subscription, I'll get $20 credit
Originally posted here