Crypto Tax Rates 2024: Full Info HMRC Guide
18 Sep, 2024 · 10 min read
Discover all about the UK crypto tax rates in 2024 and prepare your crypto taxes ahead of the January deadline.
In the UK, cryptocurrencies can be taxed under capital gains taxes or income taxes, depending on the nature of the transactions, with the tax rates ranging from 0% to 45%.
Let’s cover how cryptocurrencies are taxed in the UK, which crypto trades are taxed at a capital gains tax rate, how income taxes work when earning crypto, and much more!
Taxation of Cryptocurrency in the UK
The taxation of cryptocurrency in the UK will depend on the type of transaction you conduct, which can fall under two categories:
- Income taxes
- Capital gains taxes
Let’s cover in more detail what tax rates apply in each case.
Types of Crypto Taxes in the UK
Here are the type of crypto taxes in the UK:
| Crypto Tax Type | Tax rate |
|---|---|
| Capital gains taxes | 0%, 10%, or 20% |
| Income taxes | 0%, 20%, 40%, or 45% |
Capital Gains Tax Rates
Capital gains taxes result when you sell assets like cryptocurrencies and generate a profit. In the UK, the gain you have from the sale of assets like stocks or digital assets can be 10% or 20%.
If you have gains of up to £3,000, you don’t have to pay capital gains taxes in the UK which can be attractive for individuals looking to tap into crypto as a hobby.
Crypto transactions that could lead to capital gains taxes include:
- Selling a crypto asset for another crypto asset;
- Selling a cryptocurrency to FIAT (e.g., GBP);
- Selling an NFT for FIAT;
- Selling an NFT for a cryptocurrency;
- Spending cryptocurrency to buy a product/service;
- Gifting cryptocurrencies to someone other than your spouse/civil partner.
Here’s how capital gains tax rates work in the UK:
| Bracket | Taxable Income | Capital Gains Tax Rate |
|---|---|---|
| Basic rate | £12,571 to £50,270 | 10% |
| Higher rate | £50,271 to £125,140 | 20% |
Annual Exempt Amount
The UK offers a tax benefit for investors where you can have a yearly deduction from your total capital gains to lower your taxes. Moreover, if you don’t surpass that annual threshold, you won’t have to pay capital gains taxes.
However, this amount was reduced in 2024 to a capital gains tax-free allowance of £3,000. The UK also offers a tax-free allowance for income taxes, which we will cover later in this article.
Example of Capital Gains Tax Calculation
You bought 1 Bitcoin (BTC) in December 2023 at £41K.
In March 2024, that Bitcoin was worth £68K, and you decided to sell it.
Your total capital gain is £27K (£68K-£41K).
In 2024, the capital gains tax-free allowance is £3K. You need to subtract that allowance from your gains. Thus, your taxable gain is £24K (£27K-£3K).
Let’s imagine that your yearly taxable income is £55K. That means you’ll fall under the Higher Rate for capital gains taxes, and that profit will be taxed at 40%.
Income Tax Rates
Income taxes refer to taxes over the total taxable income you have each year, which usually are from salaries. However, in the crypto ecosystem, you can earn income from transactions like:
- Earning crypto interest;
- Receiving staking rewards;
- Earning mining rewards;
- Receiving cryptocurrencies from airdrops;
- Receiving new crypto tokens from a hard fork.
If you earn crypto income, you have to add that to your total income, which may affect the tax bracket you fall under.
Here’s how income tax rates work in the UK:
| Bracket | Taxable Income | Income Tax Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £125,140 | 40% |
| Additional rate | over £125,140 45% | 45% |
Annual Exempt Amount
In the UK, taxpayers can enjoy a tax-free allowance on their income if they don’t cross a certain threshold.
In 2024, the personal tax-free allowance (i.e., threshold) is £12,570.
Example of Income Tax Calculation
You make £55K/year as a salary in the UK. But, you received some coins from an airdrop. Let’s assume that the Fair Market Value (in GBP) of that airdrop was £2K.
Any type of crypto income will have to be added to your income. As a result, your total taxable income would be £57K.
According to the income tax rates for 2024, your income will be taxed at a 40% rate.
Categories of Cryptocurrency Income in the UK
Earning any crypto-related income will be added to your total taxable income for the year and taxed according to your tax bracket in the UK. Let’s break down the types of crypto income you can experience in the UK:
Income from Employment
You can earn crypto income from employment if you receive your salary in any form of cryptocurrency. If you work for a crypto company in the UK, you may receive your salary in Bitcoin, and this income will be taxed under income taxes.
You need to determine the Fair Market Value (in GBP) of all the salaries you received at that time and add those up to determine your total taxable income for the year.
You’ll be taxed at 10%, 20%, or 45% according to the UK income tax rates.
Income from Self-Employment
In the case of self-employment, you may receive compensation for your services in cryptocurrency. Crypto income from self-employment works similarly to being employed, as the income tax rates are the same in the UK.
However, if you’re self-employed in the UK, you can deduct business expenses from your total income, reducing the amount of taxable income.
You can either deduct business expenses or benefit from one of the tax-free allowances for self-employed people. If you have considerable self-employed income (over £1,000), it would be more advantageous to deduct business expenses.
Other Sources of Cryptocurrency Income
You can still earn crypto income from transactions like receiving staking rewards, mining rewards, airdrops, or hard forks. If you have crypto income from those activities, you have to add it to your total taxable income, and you’ll be taxed under the regular income tax rates.
Additional Crypto Taxes
Cryptocurrency could be subject to additional taxes in the UK, including:
Value Added Tax (VAT)
If you use your cryptocurrency to buy a service or product, you’ll have to pay VAT for the product/service you’re buying even though you’re using crypto to make the purchase.
The VAT rates in the UK are:
| Bracket | Tax rate |
|---|---|
| Standard rate (e.g., most goods) | 20% |
| Reduced rate (e.g., electricity) | 10% |
| Zero rate (e.g., food) | 0% |
However, transactions between cryptocurrencies and FIAT (e.g., GBP) are not subject to VAT in the UK, given the CJEU Hedqvist ruling.
Inheritance Tax
Assets are taxed on inheritance in the UK, and since cryptocurrency is an asset, it will be included in the inheritance to be taxed.
However, you’re only taxed if, at the moment of death, the value of the total assets is over £325,000. In that case, the inheritance tax is usually a flat rate of 40%, but this can be reduced.
How to Report Your Crypto Taxes in the UK
In the UK, you have to file the income you have from crypto activities like staking or mining and the gains from trading cryptocurrencies.
Your income should be reported on the Self-Assessment Tax Return SA100 form, while gains and losses have to be included on the Capital Gains Summary SA108 form.
Deadlines and Important Dates
In the UK, taxpayers have to report their taxes for the 24/25 tax year until the January 31, 2025 deadline. You need to file your self-assessment tax return by that date.
Frequently asked questions
about Crypto Tax Rates in the UK
Conclusion – Crypto Tax Rates in the UK
Crypto tax rates in the UK depend on the nature of your transactions, falling under capital gains taxes or income taxes.
Capital gains taxes over crypto profits can be 0%, 10%, or 20%, depending on your income tax bracket, while income tax rates can range from 0% to 45%.
In either case, you have to report your crypto income and gains in the UK. The easiest way is using crypto tax software like CoinTracking, which tracks your trades, determines gains, and generates tax reports.
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