Check if you need to pay tax when you receive cryptoassets

Crypto Taxes in the United Kingdom

If your losses exceed your gains in a tax year, you can carry forward these losses to offset future gains. This can be especially useful in years when you have high capital gains. It’s important to keep detailed records, as these losses can be carried forward indefinitely but cannot be used to offset other types of income. According to them, if you obtain a liquidity pool token by contributing your cryptocurrency, this counts as a disposal. What you need to do is calculate your cost basis by summing up the value of the tokens you have contributed to the pool.

  • Again, regardless of the platform you use, your cryptocurrency will only ever be subject to Income Tax or Capital Gains Tax.
  • However, you can invest in the VanEck Vectors Digital Assets Equity UCITS ETF, which is designed to track the price of companies with significant exposure to crypto and blockchain.
  • You’ll need to work out the pooled cost every time you buy or sell tokens.
  • If you’re considered a trader by HMRC, your crypto activity could be classified as a trade and would then be subject to Income Tax rather than Capital Gains Tax.
  • HMRC has very specific guidance on what constitutes an allowable cost in cryptocurrency.

This ensures that you can accurately calculate your cryptocurrency gains and losses in the future. Capital losses from crypto transactions can be considered for your tax liability. If crypto is disposed of for less than its allowable cost (i.e., sold at a loss), then the loss can be deducted to reduce the overall capital gain. You can also claim total losses for crypto if the value has dropped to zero or a minimal amount.

Do I have to pay taxes on crypto in the UK?

However, you can gift cryptocurrencies to your spouse or civil partner without incurring taxes, and you can donate cryptocurrencies to a registered charity without paying taxes. It is considered a form of disposal and is therefore subject to Capital Gains Tax. Purchasing cryptocurrencies with stablecoins is treated as a cryptocurrency trade, and any profit is thereby subject to Capital Gains Tax. Now we’ll see different specific cases of cryptocurrency taxation in UK, so that we’ll try to cover many examples – in some of these cases you could find yourself there too. Similarly, for stolen cryptocurrencies, the United Kingdom’s Revenue Agency (HMRC) does not classify theft as a disposal.

Unlike some jurisdictions, there is no prescribed ceiling on the magnitude of capital losses that a taxpayer can apply to mitigate their capital gains liability. In some instances, you may also need to pay National Insurance contributions. So, if you exchange Bitcoin for Ether or another cryptocurrency, you’ll have to pay Capital Gains Tax. They’re not interested in the fact that you’re using it to acquire another asset; they’re only interested in the fact that you’re getting rid of one. So, if you make a profit, you must pay Capital Gains Tax on the asset you sell. However, it is critical that you keep detailed records of your crypto transactions in order to keep a detailed account of your cost basis.

UK capital gains tax rates

Next, deduct this total from the fair market value of the tokens at the time of disposal. This figure will then serve as the cost basis for your liquidity pool tokens, which is essential to know for when you decide to withdraw them from the pool. Whilst most crypto transactions Crypto Taxes in the United Kingdom will be treated as capital transactions, certain activities may be subject to income tax instead, these can include mining, staking and receiving airdrops. In instances where the sale price is less than the purchase price, this results in a capital loss.

Crypto Taxes in the United Kingdom

That’s why it’s always recommended to seek guidance from the right resources. A well-designed crypto tax software can be your best friend on this journey, helping you accurately track, calculate, and report your gains and losses. So, let’s dive in and uncover the definitive guide to cryptocurrency taxation in the UK – because knowledge is power, and when it comes to taxes, ignorance is definitely not bliss.

Harvest crypto losses

You need to report your taxable crypto transactions on your Income Tax return for individuals (SA 100 form). Subject to any applicable extensions, the income tax filing deadline is the end of January every year if you lodge the online tax return. The deadline would be the end of October if you lodge the paper tax return. It is of capital importance to deeply understand these tax rules to ensure that all gains and losses are properly declared. As the popularity of cryptocurrencies continues to grow, it becomes even more important to stay informed and compliant with the tax regulations. It’s important to note that HM Revenue & Customs (HMRC) has been closely monitoring cryptocurrency transactions and has increased its efforts to identify those who may be evading taxes.

  • For instance, leaving assets to a spouse, civil partner, charity, or community amateur sports club can eliminate Inheritance Tax.
  • Fees can show up in all kinds of cryptocurrency transactions and is often the most cryptic part when calculating taxes.
  • If there are no purchases within 30 days after the disposal, we can take the weighted average from the section 104 pool to calculate the cost basis.
  • Appropriate expenses can be deducted from this income before calculating taxable income.
  • If the value of those tokens increases and you decide to sell or exchange them, you may also have to pay Capital Gains Tax on the profit.
  • Please remember to talk to us about any crypto transactions you have made so that we can consider the tax implications with you.

HMRC is increasingly vigilant regarding crypto transactions, and not reporting can be seen as tax evasion. This rule is applied when neither the Same-Day Rule nor the Bed and Breakfasting Rule are applicable to the transactions. Under the Section 104 Rule, an average cost basis is calculated for a pool of assets. This is done by summing the total amount spent on all assets in the pool and dividing it by the total quantity of coins or tokens held.

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