Check if you need to pay tax when you sell cryptoassets

In recent months, cryptocurrency has been the talk of the town. Its popularity has taken over the world amid the Covid pandemic. Several entrepreneurs and celebrities across the globe, like Elon Musk, Mike Tyson and Kanye West have already invested in cryptocurrencies. how to not pay tax on cryptocurrency uk Also the tokens need to be converted into GBP sterling at the time of each transaction (i.e. purchase or sale) and their market value needs to be ascertained. When you buy tokens, add the amount you paid for them to the appropriate pool.

Where an employer is not able to deduct the full amount of Income Tax due, they must still account to HMRC for the balance. In these circumstances, the employee must reimburse their employer within 90 days of the end of the tax year. Working out pooled costs can be complex – for example, the cost differs if at some point the blockchain had a hard fork – we’ve written previously about famous forks from Bitcoin. I am with WIS from past 6 months and my experience is very good.

Cryptoassets: The Revenue’s tax stance

We also provide private client and tax planning services to companies and high net worth individuals. For soft forks, you’ll receive no new assets – you can’t pay any tax. HMRC has pretty specific guidance on what is an allowable cost in crypto. These are costs you can add to your cost basis and transfer fees are not included in this list. So we can safely assume transfer fees cannot be added to your cost basis and they would be viewed as disposals in some instances. But, before you exhale a sigh of relief, keep in mind that just because HMRC hasn’t mentioned the cryptocurrency exchange you use doesn’t mean they haven’t contacted them.

I’m very grateful to WIS – always quick and positive to respond and extremely helpful whether by email or on calls. I have been a client of WIS for a little over 18 months since my previous accountant closed their practice and I transferred to WIS after having a great meeting in person with Wijay. Since that time these guys have been brilliant, patient and ever so helpful in equal measures. I’m from the corporate world but I’m not a corporate guy.

Podcast: The basics of cryptocurrency and tax with LifeStyled Club

For anyone tempted to do the same, Mr Cannon leaves some extra parting advice. The firm is wholly composed of Chartered Certified Accountants and all of our firm partners hold practising licence and professional indemnity insurance to carry out regulated activities in the UK. You should ensure you download reports regularly from your exchanges as they can lose your data or just delete it permanently after a certain period of data. However, interest is still payable starting February 1st 2022, meaning you should still aim to file your taxes by 31st January 2022.

  • Whenever the crypto currency is spent, withdrawn or exchanged for another crypto there are capital gains tax implications.
  • Because it is possible to use crypto without releasing personal information, many people think it is fully anonymous.
  • For example, if you are resident in the UK but you are domiciled in France and you own Bitcoin , then your Bitcoin holding will be treated by HMRC as a UK asset.
  • Hobby miners will pay Income Tax on mined coins, as well as Capital Gains Tax when they later dispose of those mined coins.
  • All of them are great professionals, very good at what they do and they have always gone over and beyond to help me understand and support my needs.
  • You can deduct certain allowable costs, including a proportion of the pooled cost of your tokens when working out your gain.

It is likelyHMRCwill now discoverbitcoinholdings as they begin to contact the biggest cryptocurrency exchange websites. It is strongly recommended that you consult a tax lawyer as soon as possible to receive detailed advice on how to take control of the situation and negotiate with HMRC. HMRC has the Know your customer information you provided when your signed up for a UK exchange or wallet. Many crypto asset owners have already had a letter from HMRC reminding them about Capital Gains Tax.

Deduct the cost basis from the value of your crypto at disposal

HMRC recognises that most individuals will hold cryptocurrency as a personal investment, hoping for capital appreciation. HMRC does not constitute the purchase and selling of cyptoassets as gambling, therefore taxes do have to be paid once the online currency is sold. HMRC will notify a taxpayer in writing when it commences an investigation into their tax affairs. Typically, if HMRC starts a formal civil investigation, a letter will be sent requesting more information.

how to avoid tax on cryptocurrency uk

Cryptocurrency transactions considered as income are taxed at the same rate as your ordinary income tax bracket. In some cases, you may also be required to pay National Insurance contributions on your cryptocurrency earnings. Even better news is the fact that you can carry these losses forward for up to four years.


At Alexander & Co, all our tax accountants are fully certified, ensuring we provide expert advice to help reduce your tax liability as much as possible and keep you on the right side of HMRC. Where a resident is Non-domiciled, any exchange tokens they hold as a beneficial owner would not usually be liable for UK tax. Note that these rules only apply to individuals who are employed and not self-employed. Also, in the UK, there is a personal CGT allowance of £12,300 at the time of writing. Yes, HMRC provided guidance in 2018 on the circumstances in which you need to pay CGT after gifting crypto. However, similar to other types of financial gifting, in many countries transferring crypto to someone else counts as a disposal of an asset, or a sale.

I have enlisted the services of the accountancy, insurances and mortgage teams and they have been outstanding. Our team of chartered tax advisers has extensive experience in handling all types of crypto-related transactions and can help you navigate the complex world of cryptocurrency taxation, contact us today. If you have sold, gifted or spent cryptocurrency within the tax year, you may need to declare any profit or gains on your self-assessment tax return. Tax treatment of any transaction involving the use of cryptocurrencies needs to be looked at on a case-by-case basis considering the specific facts and circumstances.

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