Understanding cryptoasset taxes in the UK

Understanding cryptoasset taxes in the UK

By Published On: 10 December 2023Categories: Tax

Whether you currently own cryptoassets, or you have done previously, it’s crucial to understand the tax implications and what you might owe to HMRC. In this blog, we’ll delve into the rules surrounding crypto tax and explore how you can stay compliant.

HMRC’s stance on crypto tax

HMRC initially likened cryptoassets to gambling back in 2014, suggesting they might not be subject to taxation as they were considered speculative transactions. This created a misconception that gains from crypto trading were tax-exempt. However, as cryptoassets grew in popularity, HMRC clarified that crypto trading was not similar to gambling and is indeed subject to taxation, often including capital gains tax.

How cryptoassets are taxed

Despite cryptoassets not being considered money or currency by financial institutions, HMRC still taxes you on them, treating them similarly to the way they treat shares. Depending on what kind of transactions you make, your cryptoassets will be subject to Capital Gains Tax and/or Income Tax.

If your capital gains surpass the £6,000 tax-free limit, you’ll face a tax rate of 10% or 20%. Exceeding the personal allowance will mean any additional crypto income is subject to Income Tax at 20% to 45%, depending on which Income Tax band you fall under. Keep in mind that for the 2024/25 financial year the tax-free allowance has been reduced to £3,000.

You should also ensure you report all your losses as these can be utilised against future gains.

HMRC’s ability to track crypto

HMRC is able to effectively track crypto transactions by using data sharing programs with Uk exchanges and obtaining information from exchanges such as crypto.com. HMRC also has data dating back to 2014 as well as ‘Know Your Customer’ information from exchange and wallet sign-ups. This information is now being used to monitor crypto activities and determine those that are not paying their tax on cryptoassets. The tax authority is even sending out ‘nudge’ letters to prompt individuals and businesses to declare their crypto activities.

How Vantage Accounting can assist

Whether you are currently holding cryptoassets, or have held them in the past, completing a tax return and declaring those assets is essential. The specialist tax team here at Vantage Accounting are here to help with your crypto tax needs. Reach out to your client director to explore how we can assist you. If you’re yet to sign up with us, contact us today for more information on our services.

Note: All the information and advice in this blog post was correct at the time of writing.

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