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Crypto on PayPal – Understanding Total Gain

The information provided by PayPal is not intended to be and should not be construed as tax advice. You should consult your tax advisor regarding which cost-basis method is appropriate for your situation.

How are crypto gains and losses taxed in the UK?
Crypto gains and losses for individuals are generally determined using the "pooling" method and characterized as capital gains or losses. The pooling method calculates a respective cryptocurrency's allowable cost or cost basis at the time of sale. Once the allocable cost is known, it's subtracted from the proceeds of the sale. The difference between the proceeds from the sale and the allocable cost is the gain or loss from the transaction.

Below is an example of how crypto gains and losses are calculated:
PayPal user BUYS 1 BTC for £30,000 on Day1. On Day 35, a PayPal user BUYS an additional 1 BTC for £40,000.

  • What is the Cost Basis Pool: At this point, the total allocable cost of the BTC pool is £70,000 and has 2 BTC, or £35,000 per BTC (£70,000/2).

PayPal user SELLS 1 BTC on Day 85 for £50,000.

  • What is the Gain or Loss: We know from above the allocable cost for 1 BTC in this pool is £35,000. As a result, when that is subtracted from the £50,000 proceeds from the sale, there's a £15,000 gain.

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