Hedging potential CGT changes in Autumn Budget
Discussion
I've made a large, unrealised profit in crypto (bought years ago but not sold).
I do plan to exit when I feel like the current "cycle" peaks but that could well be in 3-6 months time.
I'm becoming increasingly concerned about the talk of aligning CGT with income tax rates in the Autumn budget. If this were to happen it would be a 6 figure additional tax bill for me vs selling now with the current rules.
From what I can tell I can hedge against this by doing the following:
Sell said crypto assets on Tuesday 26th October.
If he announces that the rules have changed on Wednesday 27th (Autumn budget day) don't buy back for > 30 days and pay CGT at the current rate of 20%. Buy back what I can 32 days later re-basing the portfolio at the new purchase price.
If no change is announced re-purchase on Wednesday 27th and I won't have created any meaningful CGT event due to the "bed and breakfasting" rules.
Just wanted to sanity check my plan to see if anyone can spot any obvious errors. Does this sound like the best way to hedge any potential changes? Thanks!
I do plan to exit when I feel like the current "cycle" peaks but that could well be in 3-6 months time.
I'm becoming increasingly concerned about the talk of aligning CGT with income tax rates in the Autumn budget. If this were to happen it would be a 6 figure additional tax bill for me vs selling now with the current rules.
From what I can tell I can hedge against this by doing the following:
Sell said crypto assets on Tuesday 26th October.
If he announces that the rules have changed on Wednesday 27th (Autumn budget day) don't buy back for > 30 days and pay CGT at the current rate of 20%. Buy back what I can 32 days later re-basing the portfolio at the new purchase price.
If no change is announced re-purchase on Wednesday 27th and I won't have created any meaningful CGT event due to the "bed and breakfasting" rules.
Just wanted to sanity check my plan to see if anyone can spot any obvious errors. Does this sound like the best way to hedge any potential changes? Thanks!
If CGT rates change will they take effect immediately or in the following tax year?
I don't see any issue with your plan, however I'm always wary of letting the tax tail wag the investment dog.
Your plan isn't a hedge - it's being out of the market completely for a month. Given the volatility of bitcoin you could gain or lose more than any potential CGT bill with normal market movements.
Will you buy back 32 days later regardless of price? Will you buy back less your impending CGT bill?
Maybe you could consider doing that plan with 50% of your holding.
I don't see any issue with your plan, however I'm always wary of letting the tax tail wag the investment dog.
Your plan isn't a hedge - it's being out of the market completely for a month. Given the volatility of bitcoin you could gain or lose more than any potential CGT bill with normal market movements.
Will you buy back 32 days later regardless of price? Will you buy back less your impending CGT bill?
Maybe you could consider doing that plan with 50% of your holding.
LeoSayer said:
If CGT rates change will they take effect immediately or in the following tax year?
I don't see any issue with your plan, however I'm always wary of letting the tax tail wag the investment dog.
Your plan isn't a hedge - it's being out of the market completely for a month. Given the volatility of bitcoin you could gain or lose more than any potential CGT bill with normal market movements.
Will you buy back 32 days later regardless of price? Will you buy back less your impending CGT bill?
Maybe you could consider doing that plan with 50% of your holding.
The plan is to buy back within 24 hours if there's no change to the CGT tax rates (sell the day before the budget, buy back on the day of the budget). There could be volatility within this 24 hour period but I'd hope not much. I don't see any issue with your plan, however I'm always wary of letting the tax tail wag the investment dog.
Your plan isn't a hedge - it's being out of the market completely for a month. Given the volatility of bitcoin you could gain or lose more than any potential CGT bill with normal market movements.
Will you buy back 32 days later regardless of price? Will you buy back less your impending CGT bill?
Maybe you could consider doing that plan with 50% of your holding.
IF there is a change you're right I'm out for 32 days but I end up only paying 20% on my gains so far not 40 & 45% which will be a 6 figure saving in this case?
Edited to add: if CGT changes take place I'm assuming they'll be immediate. Delaying them could create a massive sell off in several markets ahead of the financial year ending and they'd surely want to "trap" people to maximise the take?
peterh2 said:
Edited to add: if CGT changes take place I'm assuming they'll be immediate. Delaying them could create a massive sell off in several markets ahead of the financial year ending and they'd surely want to "trap" people to maximise the take?
I'd be very surprised if taxes change within tax year or apply retrospectively. If they change within tax year, then I think some tax payers would have to make two different tax returns/calculations for the same tax year and I'm not sure how that would work. If they apply retrospectively, then people who have made decisions based on the previous arrangements would be right to be annoyed.I think the changes that apply immediately tend to be customs duty changes. If somebody can provide examples of where taxes, rather than duties, have changed within a tax year, then I'd be happy to stand corrected.
peterh2 said:
The plan is to buy back within 24 hours if there's no change to the CGT tax rates (sell the day before the budget, buy back on the day of the budget). There could be volatility within this 24 hour period but I'd hope not much.
The 30 day break and breakfast rule would apply in this scenario.I'm not sure exactly how it works but my understanding is that it would amplify your losses if you buy back at a higher price.
trevalvole said:
I'd be very surprised if taxes change within tax year or apply retrospectively. If they change within tax year, then I think some tax payers would have to make two different tax returns/calculations for the same tax year and I'm not sure how that would work. If they apply retrospectively, then people who have made decisions based on the previous arrangements would be right to be annoyed.
I think the changes that apply immediately tend to be customs duty changes. If somebody can provide examples of where taxes, rather than duties, have changed within a tax year, then I'd be happy to stand corrected.
CGT is very easy to implement on a date basis rather than tax year. The accounting/finance profession would fully expect any CGT change to happen immediately.I think the changes that apply immediately tend to be customs duty changes. If somebody can provide examples of where taxes, rather than duties, have changed within a tax year, then I'd be happy to stand corrected.
Throttle Body said:
Simpo Two said:
It would seem there's a CGT goldmine lying ahead for HMRC when all the crypto-millionaires realise they can't spend their big pile of money until they sell some of it. Unless they buy crypto-Ferraris?
Non-fungible Ferraris, perhaps? 
I have felt the same about a lotto win etc. I recall a few early crypto millionairs did the same an left the US
Gecko1978 said:
Oh I am fairly certain you can buy many things with Crypto and there are many ways to move it from the prying eyes of HMRC (tax evasion is illegal). Were I to become a crypto millionair I would simply leave the UK for a year (given £1m is way more than I earn) live in a tax haven for the year cashing out crypto etc, I may never return but who knows.
I have felt the same about a lotto win etc. I recall a few early crypto millionairs did the same an left the US
IIRC it's 5 years for cgt paid a lower rate to expire. I have felt the same about a lotto win etc. I recall a few early crypto millionairs did the same an left the US
stuthe
said:
said:Gecko1978 said:
Oh I am fairly certain you can buy many things with Crypto and there are many ways to move it from the prying eyes of HMRC (tax evasion is illegal). Were I to become a crypto millionair I would simply leave the UK for a year (given £1m is way more than I earn) live in a tax haven for the year cashing out crypto etc, I may never return but who knows.
I have felt the same about a lotto win etc. I recall a few early crypto millionairs did the same an left the US
IIRC it's 5 years for cgt paid a lower rate to expire. I have felt the same about a lotto win etc. I recall a few early crypto millionairs did the same an left the US
but its academic I dont have a £m in crypto but if I did I would happily leave the uk
There wa a huge amount of talk about CGT this time last year with most commentators saying it was “almost certain”….didn’t happen because of how unpopular it is (largely with Tory voters) and the relative lack of money it actually raises. My guess it is it is a “when not if” but I wouldn’t say it’s a definite. I too have a six figure exposure to it…..the idea of paying rate CGT on gains really changes the investment landscape and will definitely mean people move abroad to escape it.
Throttle Body said:
Happily, there is no sign of this change to CGT. I'm intending to sell down about half of my Bitcoin in December/January time wait for the big pullback before loading up again. I would just have Hodled if the change to CGT had been made.
How do you know a pullback won't happen before then?Every pre-budget discussion now features speculation on CGT changes. There have been some significant over the past few years. And there was one in this Budget too - but it didn't make the Budget Speech and it doesn't involve any changes to the calculations.
Since April 2020, people selling residential properties have had a very tight 30 day time limit to calculate their CGT liability, submit their calculations to HMRC AND pay the CGT bill. 30 days was always stupidly tight and I would expect that huge numbers of people have been unable to meet this very tight timetable.
Consequently, the Budget Brief contained a low key sentence saying that the 30 time limit is being doubled to 60 days.
Since April 2020, people selling residential properties have had a very tight 30 day time limit to calculate their CGT liability, submit their calculations to HMRC AND pay the CGT bill. 30 days was always stupidly tight and I would expect that huge numbers of people have been unable to meet this very tight timetable.
Consequently, the Budget Brief contained a low key sentence saying that the 30 time limit is being doubled to 60 days.
Throttle Body said:
Happily, there is no sign of this change to CGT. I'm intending to sell down about half of my Bitcoin in December/January time wait for the big pullback before loading up again. I would just have Hodled if the change to CGT had been made.
Why not stash the bit you're planning on selling down into a service like Nexo, or if you're outside UK, Celcius. Earn 4-5% on your crypto and just live off that?Gassing Station | Finance | Top of Page | What's New | My Stuff