Reduce & Avoid Crypto Taxes – SAVE MONEY! UK 2024

It’s certainly possible to legally avoid and reduce crypto taxes in the UK! 

From taking advantage of the income and capital gains tax-free allowance to deducting losses and donating crypto, there are many options to save on your UK crypto taxes.

Let’s cover how crypto is taxed in the UK, what legal strategies you can employ to reduce crypto taxes, what resources to use to lower your tax bill, and much more!

Crypto Taxes in the UK: The Basics

Crypto is taxed at a capital gains and income tax level in the UK, depending on the type of transaction. Let’s cover the differences:

Capital Gains Tax 

Disposing of cryptocurrencies in the UK leads to a taxable event, subject to capital gains taxes, including:

• Converting a cryptocurrency to FIAT (GBP)
• Trading crypto for another cryptocurrency
• Trading crypto for any token (e.g., NFTs, DeFi token)
• Trading a cryptocurrency for a stablecoin
• Spending crypto to purchase a product/service
• Gifting cryptocurrencies to a friend

With any of these transactions, you need to determine the gain/loss on each trade and pay the appropriate capital gains taxes of 10% or 20%.

Income Tax

Earning income from cryptocurrencies will lead to income taxes in the UK, with tax rates depending on the income tax bracket you fall in. 

Here are some of the taxable events subject to income taxes:

• Earning coins from crypto mining;
• Earning rewards from crypto staking;
• Earning coins from interest-earning products;
• Receiving crypto as a salary;
• Receiving new coins from a hard fork or airdrop.

You need to determine the Fair Market Value (in GBP) of all the new coins you received at the time you received them. That income will be taxed according to your total income tax bracket in the UK, from 0% to 45% (progressive rates).

How to avoid tax on cryptocurrency in the UK?

1. Enjoy your capital gains tax free allowance

For the 2024/2025 tax year, the individual capital gains tax-free allowance is GBP 3,000, meaning if your gains are up to that amount, you won’t have to pay any capital gains taxes.

For example, if you earned up to GBP 3,000 in profits from crypto trading, you wouldn’t have to pay capital gains taxes.

2. Income tax-free allowance

For the 2024/2025 tax year, the tax-free personal Allowance is GBP 12,750, meaning you don’t have to pay income taxes if your total income, including crypto income from activities like mining or staking, doesn’t surpass that amount.

3. Offset gains with capital losses

You can realise losses from your crypto trading activity, lower your total capital gains for that year, and reduce your capital gains taxes. If you only have losses this year, you can carry those forward in future years as long as you register them within four years. 

4. Direct crypto to retirement products

The UK, similarly to the US, has retirement products (e.g., SIPP, ISA) that offer tax savings for investors. You can redirect cryptocurrencies to these products and save on your crypto taxes if you meet the necessary criteria (please consult with your tax advisor).

5. Donate cryptocurrencies

In the UK, donating cryptocurrencies to a registered charity enables you to deduct that donation from your taxes, saving on your tax bill while doing a good deed, assuming you’re not related to the charity and do not gain an advantage from it.

6. Gifting digital assets to your spouse or civil partner

Gifting cryptocurrencies to your spouse or civil partner can lead to saving on your crypto taxes. The Fair Market Value (in GBP) of the gift will be taken by your spouse/civil partner, meaning that both of you can use your individual tax-free allowance instead of just one allowance.

7. Time your gains

Timing the moment you realise your gains can save you on taxes if there are fluctuations in your yearly income. If you realise gains in a year when you have a lower income, you can enjoy a lower capital gains tax since that rate is dependent on whether you make more than GBP 50,270/year. 

8. Keep accurate records of your activity

If you have a reduction in taxes from employing legal strategies, you should pay even more attention to your records. You should always be able to keep proof of your transactions and tax calculations, including other information (e.g., date of acquisitions, date of sales, sales proceeds, Fair Market Values, gains/losses) that could be presented to tax authorities (e.g., HMRC).

9. Use crypto tax software and talk to a professional

The best way to spot potential ways to save on your crypto taxes is to properly track your holdings with a crypto tax software that enables you to track gains/income from all types of taxable transactions, from disposals to donations. 

Besides using crypto tax software, working with a top crypto tax professional in the UK can help you plan ahead to optimise your crypto taxes even more.

Optimize & file your crypto taxes with CoinTracking

With the use of CoinTracking, you can properly track all of your crypto holdings and identify the opportunities in your portfolio to save on crypto taxes.

With CoinTracking, you can import all of your crypto trades and determine the gains/losses from all of your crypto trading/disposing (including spending crypto for purchases or donating crypto). 

Besides tracking gains, CoinTracking can help you determine the income from all your crypto activities (e.g., airdrops, hard forks, staking, crypto mining), which can get complicated once you receive different batches of coins, given the difficulty of tracking their FMVs.

Finally, you can optimise your crypto taxes by tracking all of your trades and then generating the right tax forms to file your crypto taxes.

How to reduce YOUR UK crypto taxes in CoinTracking

You can only plan crypto tax saving strategies if you are 100% on top of your holdings and know the potential ways to save on your crypto taxes ahead of time. You can do so with CoinTracking by tracking losses and determining whether you should recognise them or by tracking donations to later deduct from your gains.

Crypto tax: Evasion vs Avoidance – what’s the difference?

Is it possible to hide cryptocurrencies from HMRC?

You can try to hide cryptocurrencies from tax authorities, but most of them, including the IRS (US) and the HMRC (UK), have the technological and legal resources to discover crypto holdings from taxpayers and discover if they have unreported or misreported crypto taxes.

If that’s the case, investors may face penalties and fines over their unpaid crypto taxes or face harsher consequences if that pertains in time.

How to avoid & reduce crypto taxes in other countries

United States

In the US, you can lower your crypto taxes by realising losses (e.g., tax loss harvesting), putting crypto in retirement accounts (e.g., IRAs), holding crypto for over 12 months before selling it, and donating crypto, among other measures. Discover more strategies in our US crypto tax saving guide.

Canada

In Canada, you can lower your crypto taxes by realising losses to reduce your capital gains or deducting crypto donations, among other strategies. Read more about it in our Canada crypto tax guide.

Australia

In Australia, one of the main ways to reduce your crypto taxes is to hold your cryptocurrencies for over 12 months before selling and getting a 50% discount on your capital gains taxes over those profits. Discover how to claim that benefit in our Australia crypto tax guide. 

Germany

The best crypto tax saving strategy in Germany is to hold cryptocurrencies for over 12 months before selling and enjoying tax-free gains. Read more in our German crypto tax guide.

Conclusion about the avoidance & reduction of crypto taxes

You can save on crypto taxes in the UK by employing legal tax strategies, from realising losses to enjoying capital gains and income tax-free allowances to deducting donations, among others.

To enjoy crypto tax savings, you need to keep proper records and proof of your transactions if you ever need to declare more information to tax authorities. 

Crypto tax software like CoinTracking can help you track all of your portfolio by importing trades, finding ways to save on taxes, generating tax forms, and more.