UK bitcoin holders brace for potential capital gains tax hike in budget
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With the Labour government’s autumn budget due to be announced on Wednesday, UK bitcoin (BTC-USD) holders are considering their options in anticipation of potential capital gains tax (CGT) changes. Many are weighing whether to sell their holdings now or face higher rates if CGT is increased.
Sentiment on Reddit forums suggests that many investors plan to hold their bitcoin for the months ahead, rather than sell and incur higher tax liabilities.
Read more: Crypto live prices
Bitcoin was trading at around $72,300 on Wednesday, marking an almost 2% price increase in 24 hours and an 8.63% rise over the last week, according to Coingecko data.
Bitcoin briefly bounced off its all-time high of over $73,000 (￡56,266) in the past 24 hours, prompting some holders to speculate on the start of a rally and question if selling now would be wise.
Labour chancellor Rachel Reeves is reportedly considering a range of tax measures to support public services, with CGT seen as a likely target.
UK bitcoin online forums discuss tax strategies
Some bitcoin holders are planning to hold until a potentially friendlier tax environment emerges. On the UK Bitcoin Holder Reddit forum, user Plus-Ad1544 said: “There is zero chance I’ll be profit-taking on bitcoin. It’s a long-term HODL until those CGTs come down.”
Many echoed this sentiment, viewing patience as the most effective — and tax-efficient — approach.
An alternative strategy gaining traction is leveraging loans against bitcoin holdings to potentially avoid CGT altogether.
Reddit user BlueBirdAlone74 said: “For many bitcoin holders, that means not taking profits just yet. A better strategy might be to leverage a collateralised loan to avoid CGT altogether.”
Collateralised loans allow individuals to use bitcoin as collateral without needing to sell, similar to providing equity shares as collateral to take out a loan. This could potentially preserve an individual's tax position, but the implications of such an action are still not certain, and there may be tax considerations to consider.
Platforms like Aave, a decentralised finance (DeFi) platform, allow users to deposit crypto as collateral and borrow against it, as long as the collateral value exceeds the loan's value.
Read more: Pound muted as traders hedge risks ahead of budget
User Crypto-hercules said: “In five to 10 years, collateralising bitcoin with big lenders will be commonplace. This is how the wealthy retain assets. Why sell the world’s hardest money for fiat currency?”
Exploring token-wrapping and bitcoin-related stocks
Some holders are exploring token-wrapping options, such as wrapped bitcoin (WBTC), which tokenises bitcoin on the Ethereum (ETH-USD) blockchain.