Crypto Taxes in the UK: What do I have to pay?

Tax regulations change quickly and it can be time consuming to keep up.

My Crypto Tax are experienced in cryptocurrency tax compliance and reporting.

MyCryptoTax can help you with tax planning to minimise your liability and safeguard your investment . Read on to find out what tax HMRC expects you to pay on your crypto.

What tax do you pay?

If you invest, trade, use or gift cryptocurrency in UK you may be liable to pay tax.

What tax you pay, and the relevant tax rates will vary based on the type of activities, the nature of the transactions, and your individual circumstances.

Trade or Investment?

If acquisitions and disposals of cryptocurrency constitute an “investment activity”, then profits can be subject to Capital Gains Tax.

However, if the acquisitions and disposals of cryptocurrency constitute “trading activity” then they may be subject to Income Tax and national insurance.

HMRC confirms that the question of whether cryptocurrency activities amount to trading is a question of fact. They should be assessed in the same way as disposals of shares, securities and other financial products, by reference to the “badges of trade”.

HMRC indicates that the buying and selling of cryptoassets will normally amount to investment activity.

Only in “exceptional circumstances” would HMRC expect individuals to buy and sell cryptoassets with such frequency, level of organization and sophistication that the activity amounts to a trade.

Invested in crypto.

If you trade crypto for more than the acquisition cost, you may have realised a gain and are liable to pay tax on that gain.

It’s also important to note gains when you exchange crypto to another tokens. There are special tax rules (S104 pooling, someday and 30-day rules) that need to be considered when calculating the gain.

Crypto Gifts

If you give crypto as a gift to someone other than your spouse or civil partner, this will be considered as disposal.

You are liable to pay CGT on the difference between the market value (in pound sterling) of the crypto. This applies on the date it was given away as a gift and the acquisition cost of that particular token.

Crypto Donation

If an individual donates crypto to a charity, CGT is payable on the gain and is calculated based on the market value of the date the Crypto was donated.

You are entitled to claim charitable donation tax relief if you donate to a registered charity.

Gambling winning paid in crypto

If you cash out any winning from casino, poker, and other gambling in Cryptocurrency instead of fiat currency, you may have pay tax.

Gambling winnings are normally tax free in UK however if you received the rewards in crypto, value of the initial reward may be exempt from tax, however when you trade ,use or exchange the cryptocurrency at a gain these gain may be subject to CGT.

Other Crypto income

Any crypto you receive (such as fork, airdrops, mining, staking, lending) may be considered as non-trading miscellaneous income and this will be subject to income tax.

Crypto spending

Increasing number of companies are now provide the option to pay for the good and service in cryptocurrency.

Cryptocurrency debit card allows you to spend your cryptocurrency tokens much like cash.

Using cryptocurrency to pay for goods or services may be a new form of payment alternative but users need to understand the tax implications as these transactions are considered as disposal for capital gain tax purpose.

Crypto paid as wages

It is common for employees working in crypto projects to be paid in native tokens.

If you receive all or part of your salary/freelance income in cryptocurrency you will have to pay income tax and National Insurance contributions.

The amount you pay is based on the value of the crypto on the date of receipt. Any gain from disposal of such crypto assets (that are received as employment income) is subject to Capital Gains Tax.

It’s important to check with your employer to see if they have paid income tax and relevant employee and employer national insurance on your behalf, as well as keep up-to-date records on the tokens you receive.

Company’s Invested in crypto.

With falling interest rates and rising inflation, cash deposits are becoming less attractive and many companies are looking to alternative investments for their liquid assets.

A growing number of businesses are considering investment in cryptocurrency as an attractive alternative.

For limited company’s invested in crypto, any disposal will give rise to a chargeable gain/loss and the company pays corporation tax on the gain.

What if I don’t pay?

Keeping up with changes and the amount of tax you are expected to pay on your cryptocurrency, can be overwhelming.

With all financial commitments, if you don’t pay the correct amount of tax there may be heavy penalties for you and your business.

If you’re avoiding payment or not paying your share, HMRC are in their rights to contact you and carry out compliance checks. It’s therefore extremely important to make sure you’re paying what you owe.

If you have any gain or income during a tax period, you need to report these in your tax return and pay tax on or before the due date.

It’s important to let HMRC know of any undeclared gain relating to a prior tax period, as promoted disclosure will have a higher penalty than voluntary disclosure.

You can report these either by amending the previously submitted tax return or by using the HMRC digital disclosure facility.

To find out more visit https://mycryptotax.co.uk. If you would like to speak to one of our team, give us a call on 02033021919 or email info@mycryptotax.co.uk. We are here to help keep your crypto investment secure.

The best UK crypto tax software: CoinTracking

The best crypto tax software in the UK is CoinTracking.

You can import your trades using CSV or API, track your gains/losses, and generate tax reports according to your preferred accounting method.

CoinTracking is your full crypto tax solution for:

• Importing (API & CSV) your trades from 110+ exchanges.
• DeFi and NFT support with our ETH+DEX importer.
• Importing your Binance Chain, Binance Smart Chain, and MATIC transactions.
• 25+ advanced reports, including which coins offer you a tax-free rate.
• Automatic capital Gains, according to 12 accounting methods (e.g., FIFO, LIFO, HMRC, ACB), accepted worldwide.
• Generating complete Tax Reports in your country.

Moreover, CoinTracking can easily classify all your earnings from yield farming, liquidity pools, crypto staking, and much more.

Crypto taxes with no errors: CoinTracking Full Service in the UK.

CoinTracking also offers a Full Service for UK traders. A crypto reconciliation tax expert from My Crypto Tax, a leading UK crypto tax firm, will review your CoinTracking account, help fix any errors, and ensure you submit your crypto tax reports error-free.

Disclaimer: All the information provided above is for informational purposes only and should not be considered as professional investment, legal, or tax advice. You should conduct your own research or consult with a professional financial advisor when investing.