Cryptocurrency investors often overlook the tax risks associated with their gains. In addition to the market's volatility, investors may face significant tax liabilities, such as income tax if they earned crypto through work or mining, or capital gains tax (CGT) when they sell or dispose of purchased crypto. To calculate CGT, investors must subtract the purchase price from the selling price, and they can offset losses against gains to reduce their taxable amount. However, accurate record-keeping is essential for tracking these transactions.
 

Maintaining detailed records, including transaction dates, purchase costs, and wallet addresses, is crucial, as tax authorities like HMRC may require them during checks. Investors should be cautious not to rely solely on their crypto wallets for records, as exchanges may not store this information long-term. Proper documentation is necessary to ensure compliance and avoid unexpected tax liabilities or penalties.