Please ensure Javascript is enabled for purposes of website accessibility UK cryptocurrency tax guide: everything you need to know

UK cryptocurrency tax guide: everything you need to know

Crypto investors need to report gains on cryptocurrency on their annual self-assessment tax return – or they can use HMRC’s real-time capital gains tax reporting service to pay tax on crypto. Fees and/or rewards from mining can either be income tax in the form of trading income or miscellaneous income, depending on the degree of activity, organization, and overall commerciality. Crypto assets received from these activities are subject to capital gains tax when their gains are realized. If a crypto trader or business receives an airdrop, any valuation increase will be added to the trading profits and will be subject to income tax, as well as NICs. But if an individual receives an airdrop, that will be subject to capital gains tax at the time of the disposal. HMRC considers buying one cryptocurrency and paying with another cryptocurrency a taxable event since you are in fact disposing of a cryptocurrency.

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If you earn crypto in the UK, you’ll need to pay Income Tax and National Insurance on it – just like you do when you get paid in £GBP. A negligible value claim can also be filed in the case that you lose your private keys. This claim should be filed in the same year that you lost access to your cryptocurrency.

How can I calculate my cryptocurrency capital gains?

If you invest in token XYZ and pay with ETH, you will have to calculate capital gains on the ETH disposed of. You should use the fair market value of ETH on the date you made the investment which will also become the cost basis (or allowable cost) of the pool for the purchased tokens. Calculating capital gains and losses from your crypto transactions becomes more complex when you have multiple transactions to account for. The UK requires a specific type of method for calculating the cost basis of your coins known as Shared Pool Accounting. Transfers happen all of the time, and it’s the transferability of crypto that makes it difficult for cryptocurrency exchanges to report capital gains and losses on your behalf. The HMRC has requested and obtained customer data from major exchanges and sent ‘nudge’ letters to crypto investors to encourage them to pay capital gains and income tax.

For example, if you earned £50,000 of income and had £13,000 of cryptocurrency capital gain, you’d subtract your allowance and pay 10% tax on £700 of capital gain. If you’re wondering whether cryptocurrency losses can be carried forward to offset future gains in the UK, the answer is yes. By considering customizable options and a user-friendly interface, you can select a cryptocurrency tax software that makes managing your taxes easier and more efficient. Now that we’ve got an idea of what to look for in a crypto tax software, let’s evaluate our own needs to narrow down our choices. Crypto assets are subject to CGT if you make more than the allowance in gains.

It’s important to keep accurate records of your mining and staking activities to ensure compliance with UK tax laws. A good user interface can save you time and reduce the risk of errors when managing your taxes, so it’s important to choose a software that prioritizes this feature. Another key feature to consider when selecting a cryptocurrency tax software is a user-friendly interface.

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If you meet the trading threshold, net profits will be subject to income tax at 20%, 40% and 45% (based on the tax bracket your income falls into) and national insurance at 12% and 2%. Any gain or loss must be converted to pound sterling for the tax return, even in crypto-to-crypto trades. HMRC says to use and keep a record of “consistent methodology” when making the pound sterling valuation. If you’re not sure whether you need to pay tax or how much tax you will need to pay, we’ve got you covered.

Today, some employers are paying salaries in cryptocurrency instead of fiat such as GBP to their employees. HMRC states that crypto received as employment income counts as money’s worth. This means you need to pay Income Tax in addition to National Insurance contributions on the fair market value of the crypto received. HMRC has released clear guidance on the treatment of cryptocurrency received as both airdrops and hard forks. In this section, we will take a closer look at the tax treatment of such transactions. Highly recommend if you have not yet decided on what crypto software to use.

Tax on hard forks

Trusted by industry leading British accountants who value detailed and accurate reports. Information on the accountant portal can be found on the Accountant page. If the value of your crypto keeps rising, you may also need to pay Capital Gains Tax on the profits when you exchange it for £GBP.

However, it’s important to note that certain transactions involving cryptocurrencies may still be subject to VAT. When utilizing cryptocurrencies for payment of goods or services, no value-added tax (VAT) is imposed on the cryptocurrency itself. Nevertheless, the customary VAT regulations are applicable to the purchased goods or services. If you trade, buy, or sell crypto in the UK, then you will have to pay taxes. Not everyone who deals with this kind of digital asset understands that they have to pay crypto taxes, and this can get them in a lot of trouble with HRMC. CoinTracker is our top choice for calculating your crypto and NFT taxes.

Remember to consider key features such as automatic data import, real-time tax calculations, and HMRC compliance when making your decision. Staking activities, on the other hand, may fall under the category of investment income, which is also subject to taxation. It’s important to note that HMRC regulations are constantly changing, so your chosen software should be updated regularly to ensure compliance. is an independent comparison platform and information service that aims to provide you with the tools you need to make better decisions.

What is the deadline for reporting my crypto taxes in the UK?

Individuals are liable to pay capital gains tax when they dispose of these assets. Disposal includes selling crypto for fiat, exchanging one cryptocurrency for another, or giving crypto as a gift or in exchange for goods and services. A significant amount of crypto assets have lost almost all their value since the all-time high (ATH) value. Chances are that you still own a token that is almost worthless today with very low liquidity and perhaps only traded on a few exchanges.

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If you haven’t been reporting your gains or losses in previous years, you can get everything in order by filing an amended self-assessment tax return. HMRC expects you to report all taxable events, including buying and selling cryptocurrency, even if it’s on a foreign exchange. Pricing plans for TaxBit start at $49 per year for up to 100 transactions and go up to $799 per year for unlimited transactions and advanced features.

It’s essential to keep accurate records of your cryptocurrency transactions to ensure compliance with UK tax laws. In this guide, we will explore the key features you should consider when selecting the right crypto tax software for your needs and help you make an informed decision. It will also save you a headache at the end of the tax year when how to avoid crypto taxes UK you need to fill in your tax return. That’s because you’ll be able to automatically fill in the required HMRC forms. You can also rest easy that you’re complying with all the complicated HMRC rules on crypto tax. Some platforms like Koinly and ZenLedger offer free basic services for crypto investors who make under 10,000 transactions a year.

  • It helps you identify taxable events such as trading, mining, and staking, and ensures you’re reporting your crypto activities correctly.
  • HMRC says to use and keep a record of “consistent methodology” when making the pound sterling valuation.
  • Each category has specific tax implications that individuals need to be aware of.
  • Once you’ve downloaded your tax report, you can file it yourself or send it off to an accountant.
  • For self-employed individuals who receive cryptocurrency as payment for services or running a business, it is necessary to report this income as self-employment income.

However, if you are considered to be an active or professional trader you will be subject to Income Tax treatment instead of Capital Gains Tax. In the next section, we will look closer at what types of transactions are considered disposal and the difference between Capital Gains Tax and Income Tax. We cover hundreds of exchanges, wallets, and blockchains, but if you do not see your exchange on the supported list we are more than happy to work with you to get it supported.

Using crypto tax software will help you keep up top of the current HMRC rules and make sure you’re reporting your crypto income and capital gains correctly. Crypto tax software helps you keep a record of crypto transactions and calculates the capital gain or loss when your crypto assets are sold, exchanged, given away or traded. Capital losses from crypto transactions can be considered for your tax liability. If crypto is disposed of for less than its allowable cost (i.e., sold at a loss), then the loss can be deducted to reduce the overall capital gain. You can also claim total losses for crypto if the value has dropped to zero or a minimal amount.

When do I have to pay income tax on crypto?

It will be the fair market version of the value of the crypto at the time you received it. Crypto assets aren’t considered as money or currency by key financial institutions. From a tax perspective, crypto assets are treated like shares and will be taxed accordingly.