All About Crypto Taxation in UK

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Cryptocurrency is a highly profitable industry that has spread across the world. Specifically, in the UK close to 8% of the population (as stated by the Financial Times in a recent article) invests, holds, and trades in digital currency. As of today, there are no crypto taxation laws in the United Kingdom, however, if you are a cryptocurrency investor, any gains from trading or selling crypto are taxable by HMRC (Her Majesty’s Revenue and Customs).

In this guide, we will provide you with an overview of what you need to know about crypto taxation in the UK, including the amount of return that’s non-taxable, when your tax return is due, and what to look for when filing your tax return.

Firstly, cryptocurrency is subject to taxation in the UK if you return a minimum of £12,570. There are two types of crypto taxes that you should be aware of – income tax and capital gains tax. The income tax applies when you are buying, selling, or accepting cryptocurrency (crypto airdrops). In England, Northern Ireland, and Wales, income tax starts at a minimum of 20% and can go up to 45%, depending on how much you earn. In Scotland, income tax starts at 19% and can go up to 46%. The same applies to crypto investments, so make sure you keep track of your earnings.

The tax rate is dependent on your total taxable income. Basic-rate taxpayers will pay a 10% capital gains tax (CGT), while higher-rate taxpayers will pay a 20% CGT. There is also an annual tax-free allowance of £12,300 for the tax year 2022–23.

To file your taxes, fill out the HMRC IRS Form 8949. This form requires you to enter information regarding your crypto transfers, including what, when, and how much crypto you bought and sold, and whether it was a gain or loss. You should report your gains on your self-assessment tax return when paying crypto taxes.

Like most countries, the UK allows investors to offset their losses against their gains while declaring their CGT. If you make a loss on your cryptocurrency investments, you can offset this against any gains you make in the same tax year. This means you will only be liable for CGT on the net gains you make.

You likely forgot about the past year’s crypto transactions, hence, it is advisable to keep a record of essential information regarding cryptocurrency transactions, including the date of acquisition, purchase price, and sale price. This will make it easier to calculate your CGT liability and ensure you pay the correct amount of tax. The UK government requires you to submit an online Self Assessment Tax Return to HMRC by January 31 every year.

Certain cryptocurrencies, such as Big Eyes Coin (BIG), have no tax fee in their ecosystems which is not a characteristic that all cryptos have, it is critical to research before investing.

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*This article was paid for. Cryptonomist did not write the article or test the platform.