Cryptocurrency
How does HMRC treat crypto?
Just like stocks and shares, the value of cryptoassets can go up or down.
HMRC does not consider cryptoassets to be currency or money, or that buying or selling cryptoassets is gambling. This means that, in HMRC's view, profits or gains from buying and selling cryptoassets are taxable.
There is no specific Bitcoin tax or cryptocurrency tax in the UK. Instead, your crypto will either be subject to Capital Gains Tax or Income Tax. The crypto tax you'll pay depends on the specific transactions you're making with your crypto. If you're seen to be making an income, you'll pay Income Tax.
If you earn money from exchanging (trading or selling) coins and tokens, you might owe Capital Gains Tax. If you earn money from staking or mining crypto, you’ll be liable to pay Income Tax on these profits, depending on what you make overall in a year.
Do you pay tax on crypto if you don't withdraw?
Crypto trading has a reputation of being like gambling, but unlike gambling, you'll most likely be liable to pay tax on your profits. If you hold crypto as a personal investment, you're liable to pay Capital Gains Tax on any profit you make from them.
Can HMRC see my crypto wallet?
Yes - HMRC can track cryptocurrency. HMRC has crypto transaction data from as far back as 2014. HMRC has the KYC information you provided when signing up for any UK exchange or wallet.
How do I declare crypto gains and losses to HMRC?
In order to report your crypto taxes accurately to HMRC, you will need to fill out two forms: the HMRC Self-Assessment Tax Return SA100 form (for income from crypto activity), and the HMRC Self-Assessment Capital Gains Summary SA108 (for crypto capital gains and/or losses).
What tax do I pay on crypto?
The total Capital Gains Tax you owe from trading crypto depends on how much you earn overall every year (i.e. your salary, or total self-employed income plus any other earnings).
This number determines how much of your crypto profit is taxed at 18% or 28%. These are the two tax rates for Capital Gains Tax. The tax rate that is applicable depends on the total amount of your taxable income, so you need to work this out first.
Don’t forget there is a tax-free CGT allowance of £6,000.
How do I avoid crypto tax UK?
Harvesting crypto losses is one effective way to reduce your crypto tax liability in the UK. This strategy involves selling your underperforming assets at a loss to offset any capital gains you may have incurred from selling profitable assets
If you’re earning money from trading crypto, unfortunately you’re not allowed to deduct your business spending from your profits. But if you’re staking or mining, you can. You’re allowed to deduct anything that you use wholly, exclusively and necessarily for your business e.g. mining rigs.
Something else to make use of if you’re staking or mining crypto is the Trading Allowance. You can earn up to £1,000 in untaxed income per year.
What is the 30 day rule in crypto?
An investor sells a security, such as a stock or a cryptocurrency, at a loss. Within 30 days before or after the sale, the investor buys the same or a substantially identical security. The wash-sale rule applies, and the loss is disallowed for tax purposes
What happens if you don t report cryptocurrency on taxes?
Taxpayers are required to report all cryptocurrency transactions, including buying, selling, and trading, on their tax returns. Failure to report these transactions can result in penalties and interest