We can ensure that your affairs are structured correctly, in the most tax efficient way and are compliant with HMRC. We are also able to help resolve any current HMRC investigations and by ensuring you remain compliant, minimise the likelihood of any future investigations. This rapid growth has also attracted notable attention from HMRC, who are eager to ensure that all businesses, investors and traders are paying the correct amount of tax on cryptoassets. It is important that anyone active in this sector has their tax affairs structured correctly, in a tax efficient way, whist remaining compliant with HMRC. This will help to avoid any penalties and fines as well as unplanned tax bills.

HMRC does not deem the buying and selling of cryptoassets to be the same as gambling. Depending upon how cryptoassets are held, Capital Gains Tax, Income Tax and Inheritance tax can all apply. As a relatively new area, cryptocurrency/cryptoasset tax rules are fast-moving, so it is important to keep abreast of the current and fast developing legislation. HMRC will look at the facts of each individual case in determining any taxable liability and its views may change as the sector continues to evolve. You first need to review if your past crypto trading has been correctly reported to HMRC or if you have underdeclared your crypto gains.

Are there legitimate ways to reduce tax?

Wondering if you can hold cryptocurrency investments in a SIPP or ISA? In the UK, it’s a possibility – although it’s not a straightforward process and something to check with your financial advisor. A number of our team are themselves active investors in cryptocurrency, and, as such we have first-hand experience of blockchain. Hobby miners will pay Income Tax on mined coins, as well as Capital Gains Tax when they later dispose of those mined coins. Meanwhile, for business miners, mining income will be added to trading profits and be subject to Income Tax.

However, should your situation alter please feel free to revisit our questionnaire. If you are unsure it is critical you seek advice so please do not hesitate to contact us at HMRC does not consider theft to be a disposal, as the individual still owns the stolen asset and has a right to recover it. There are some tokens, where you receive a cut of the transaction fees incurred by https://xcritical.com/ other users, your slice of this fee, all depends on your holding % of the current circulating supply. In both scenarios, a subsequent disposal of tokens received through an airdrop may result in a chargeable gain for Capital Gains Tax. The use of asset pools can, very quickly, get very complex, especially with a large number of transactions and, or the exchanging of tokens.

Cryptocurrency Tax – Cryptoassets and Capital Gains Tax

Don’t make the mistake of thinking your cryptocurrency activities are exempt from HMRC attention. In our four decades of experience, we’ve seen too many businesses hit hard due to poor tax planning and financial penalties. Blockchain businesses and individual cryptocurrency traders are no exception.

When you dispose of cryptoasset exchange tokens , you may need to pay Capital Gains Tax. Find out if you need to pay Capital Gains Tax when you sell or give away cryptoassets . If the private key to your cryptoasset wallet is lost, then HMRC say they do not consider this to be a disposal by itself.

Paid in crypto

If you have made a loss, you may be able to offset these losses against your cryptocurrency profits or other capital/trading profits. If you have bought and sold cryptocurrencies through a UK company and the company has made a loss on any individual transactions, loss relief may be available under the corporation tax loss relief rules. As mentioned above, many exchanges will keep a record of your transactions and let you download your history.

• HMRC receives information from crypto exchanges and will pursue those who fail to report their profits correctly.
• Crypto traders and investors need to be aware of the wide array of transactions ranging from basic purchase and sell orders all the way through to hard forks, airdrops, staking, etc.
• You are recommended to obtain specific professional advice before you take any action.
• When you ‘stake’ your cryptoasset wealth, it is used to help make further transactions in that cryptocurrency in a similar way to mining.
• It may be possible to make a Negligible value claim where you have lost your private key if it can be shown that there is no prospect of recovering it or of accessing the tokens in some other way.

HMRC has up to 20 years following the end of the relevant tax year to enquire into your tax returns. If you deliberately fail to declare taxable income or gains and tax has been underpaid, you may be liable to interest and penalties of up to 100% of the amount of tax due. If you are buying and holding your investment and then selling according to the market conditions, you are investing and your gains or losses will be taxed as capital. To make a report for tax on cryptocurrency UK purposes, you should use the SA100 self-assessment form and the SA108 Capital Gains Summary form. The deadline for paper tax returns for the current tax year has already been passed, but you still have a little time remaining to complete an online return which must be filed by the 31st of January 2022. Even better news is the fact that you can carry these losses forward for up to four years.

Do HMRC know about my cryptoassets?

If you need more information, you can talk to our expert online accountants, payroll experts and even VAT specialists. When filling out your Self Assessment, you’ll need to report all your income and profits. This will tell you how much you need to pay in Income Tax, National Insurance, and Capital Gains Tax. They also have the Know Your Customer information you provided when signing up for any of your UK exchanges or wallets. If you spend your crypto, you’ll need to pay Capital Gains Tax on any profits you made between buying and spending it.

The blockchain network underpinning many cryptocurrencies relies upon the peers (i.e. users) of that network to verify all of the transactions that take place. These transactions are split up into blocks and distributed to ‘miners’, who verify the transactions by solving a cryptographic hash . The miners are rewarded for their audit work through the distribution of the cryptocurrency relating to that particular blockchain. Contact us today and take the hassle out of understanding cryptocurrency tax regulation.

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The crypto industry is developing rapidly, and the position on tax has inevitably become more complicated. The emergence of unique and complex cryptocurrency like gaming and gambling platforms as well as the evolution of non-fungible tokens and hybrids tokens for specific purposes, has changed how to avoid crypto taxes uk the asset class. HMRC are constantly updating their cryptoasset guidance and we are keeping a close eye on any developments. There are some circumstances where HMRC may consider your activities to be a trade rather than investing; therefore we recommend that you seek professional advice.