Tax on Cryptocurrency UK: WARNING for Investors!

Should you be paying tax on cryptocurrency UK? Yes! And HMRC are writing to crypto-investors to make sure you know it.

Tax on Cryptocurrency UK
Tax on Cryptocurrency UK

(3 minute read)

What are Cryptoassets?

The world of crypto is shrouded by jargon which makes it seem impenetrable for those new to it.

Even HMRC’s definition can be confusing. HMRC defines cryptoassets as ‘cryptographically secured digital representations of value or contractual rights that can be:

  • transferred
  • stored
  • traded electronically’

To simplify, cryptoassets represent your ownership and control of digital assets. They are secured by a specific technology.

For example, Bitcoin is one of the most well-known crypto assets. If you have Bitcoin, you securely own and control it. You can transfer it to someone else, store it in a digital wallet or trade it (for goods or conventional currency).

There are other cryptoassets, such as NFTs which are used for visual assets such as art. It is likely that the future will bring more types of cryptoassets.

Tax on Cyrptocurrency UK

Whether you’re a seasoned crypto-investor or a curious bystander, the way cryptoassets are taxed will be of interest.

HMRC has begun contacting suspected crypto-investors to remind them of their tax obligations.

Despite being called ‘cryptocurrency’ and often being used like money, HMRC don’t consider cryptoassets to be money. Rather, these assets are considered property for tax purposes.

In particular, the letter highlights Capital Gains Tax (CGT).

As with physical assets, such as property, you pay CGT on cryptoassets if you sell them for conventional currency, swap them for other cryptoassets, spend them or gift them. You only pay CGT when the asset is worth more when you sell it than it was when you bought it.

You may also be subject to Income Tax on cryptocurrency UK.

This happens if you are paid in cryptoassets or receive the assets through mining or airdrops. You will also need to pay Income Tax for DeFi interest, staking rewards and referral bonuses.

How to Pay

The letter also provides some guidance for disclosing gains.

Gains from cryptoassets should be disclosed on your Self Assessment form. If you want to make a disclosure for previous years, use the Digital Disclosure Service.

If you’ve invested in cryptoassets, review your transactions to make sure you stay on the good side of HMRC. For those wanting to get into crypto, seek out expert guidance before you jump in at the deep end.

Don’t fret if you’re unsure, the Tax Expert team can help! We keep up to date with all the latest rules and regulations to make sure our clients are ready for new technologies and new possibilities.

Contact us at 01772 788200 to find out how we can help you invest in this new and exciting venture safely.

Kind regards Ilyas