Crypto Tax UK Guide: Everything You Need To Know

Mohit Baheti | Debitam By Mohit Baheti |
Crypto Tax UK

I don't have any Bitcoin. I don't own any cryptocurrency, I never will

Warren Buffet, 24 Feb 2020 interview with CNBC.

Cryptos and NFTs is the new age currency and art collection getting more popular in recent years which divided the realm of billionaires. While the tech guru Elon Musk supports it, veteran investor Warren Buffet, as you notice from the statement above, is vehemently against the whole idea.

All those investing and trading in Crypto must disclose their earnings in their tax return. In December 2018, HMRC introduced policy papers on Crypto assets, which resulted in the taxation of all Crypto Assets and NFT [Non-Fungible Tokens] by way of

How are Crypto Assets or NFTs Taxed?

In general, Crypto Assets can be acquired in two ways: either purchasing or through mining. Their taxability will depend on the event and nature of the acquisition.

Purchasing Crypto Assets

If such you purchase crypto assets and exchange and sold later, they will be charged to Capital Gain Tax.

Mining Crypto Assests

If you are mining Crypto Assets, it will be considered a business income. However, Cryptos are also used as a means of consideration, this will be recorded as money’s worth at the fair value on the date of the transaction.

What are the records you must keep?

You must keep all the transactions done on the exchange and the record of the wallet must be saved for at least 5 years. This must contain the following information for ease of computing tax liability:

  • Type of currency held (keep a record of all currencies separate)
  • Fair Market Value on the date of purchase and sale
  • Number of acquisitions and disposals made during the year
  • Consideration paid for acquiring
  • Nature of transaction (investment, mined or received as consideration)

HMRC will be introducing Making Tax Digital Income Tax Self Assessment that will pose as a mandatory requirement to report the transactions using the software. It is good if you start maintaining the records now and if any help is needed, get in touch with our team.

With Making Tax Digital  for Income Tax (Self-Assessment) being introduced by HMRC, all individuals will be required to maintain the records and submit the same periodically.

What are the applicable tax rates on Crypto Assets?

For Individuals, cryptos that are classed as business income will be taxed at the standard income tax rate of 20% to 45% depending upon the slab.

BandTaxable incomeTax rate
Personal allowanceUp to £12,5700%
Basic rate£12,571 - £50,27020%
Higher rate£50,271 - £150,00040%
Additional ratemore than £150,00045%

Cryptos that are classed as capital assets are chargeable to the capital gain tax rate of 10% or 20% on the gains more than the Capital Gain Allowance.

BandTaxable incomeTax rate
Basic rate£12,571 - £50,27010%
Higher rate£50,271 - £150,00020%
Additional ratemore than £150,00020%

The companies are charged 19% on the profits earned and pay through the corporation tax return.

Are there any reliefs available?

There are some reliefs available for individuals in the form of allowances. They usually get the following allowances:

  • Personal Allowance:  £12,570
  • Capital Gain Allowance: £12,300

Companies do not have any tax-free allowance, hence, taxed on the entire profit, still the companies are the most tax efficient for wealth planning and creating brand value.

Generally, the cost of acquiring the crypto assets is allowed for deduction from the sales proceeds before calculating tax.

The individuals who get crypto assets by way of mining have an option to deduct eligible expenses to plan their business taxes.

What is the deadline to file a tax return?

There is no separate tax return for declaring your profits or gains from crypto assets. These are reported along with your tax returns, and the deadline for individuals to complete their tax returns for the tax year 2021-22 online is 31 January 2023 (31 October 2022 if making paper returns).

For companies, the deadline depends upon the accounting period, usually, all companies get about 9 months to pay the taxes.

Still have any questions, get in touch with our team, and we will be happy to assist you.

Mohit Baheti | Debitam By Mohit Baheti |
Note: Please note that the content of the above blog and the aforementioned information are solely for the purpose of awareness and are informative in nature. The content is designed with intent to ease the understanding while preserving the essence and importance of the compliance rules and shall not be considered as an ultimate replication of the rules. Debitam does not own any responsibility whatsoever for any unpleasant event that may arise due to the misinterpretation of a specific part or whole of the information.

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