In the UK, the tax implications of gifting cryptocurrency depend on several factors, including the relationship between the giver and the recipient, and the value of the gift. Here are the key points to consider:
Capital Gains Tax (CGT): When you gift cryptocurrency to someone other than your spouse or civil partner, for tax purposes, it’s considered as a disposal of an asset. This means you might have to pay Capital Gains Tax on any gain in the value of the cryptocurrency from the time you acquired it to the time you gifted it. The value of the gift for CGT purposes is its market value at the time of the gift.
Spouse or Civil Partner Exemption: If you gift cryptocurrency to your spouse or civil partner, it’s generally not subject to CGT at the time of the gift. However, if they later dispose of the cryptocurrency, they may have to pay CGT based on the increase in value from when you originally acquired it.
Inheritance Tax (IHT): Depending on the value of the gift and the timing, it may be subject to Inheritance Tax. If you gift cryptocurrency and then live for another seven years, the gift is usually outside of your estate for IHT purposes. However, if you pass away within seven years, the gift may be subject to IHT, depending on its value and other gifts you’ve made.
Annual Exemption: Each tax year, you have an annual exemption for gifts which might apply to cryptocurrency. For the tax year 2021-22, this exemption is £3,000. Any gifts up to this amount in total in a tax year are exempt from IHT.
Gifts Out of Income: Regular gifts out of your income that don’t affect your standard of living may also be exempt from IHT.
Recipient’s Tax: The recipient of the gift doesn’t pay CGT or Income Tax at the time of the gift. However, if they later sell the cryptocurrency, they will pay CGT based on the increase in value from the time you originally acquired it.
It’s important to keep detailed records of any such gifts, including the date, the market value at the time of the gift, and whom you gifted it to. Tax laws can be complex, and it’s advisable to consult with a tax professional for personalized advice, especially in scenarios involving significant amounts or complex financial situations.