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The total Capital Gains Tax you owe from trading crypto depends on how much you earn overall every year (i.e. your salary, or total self-employed income plus any other earnings).
This number determines how much of your crypto profit is taxed at 10% or 20%.
Our capital gains tax rates guide explains this in more detail.
In your case where your capital gains from crypto were £20,000 and your total annual earnings were £20,000:
You pay no CGT on the first £12,300 that you make. This is the tax-free yearly CGT allowance.
You pay tax on £7,700 of your capital gains at 10%, which is £770
You need to save
to pay your £770.00 tax bill by 31.01.2024 which is in 540 days
For a long time, crypto trading, mining and other related activity was a grey area for HMRC. There was no specific regulation related to cryptocurrencies. But as prominence in these profits grew, HMRC had to catch up. They published their first cryptoasset manual in March 2021, which gave specific guidance for the taxes owed on different crypto trading activities.
Why? Because no money is free money.
If you earn more than a certain amount in untaxed income, you’re legally bound to hand some of it over to HMRC. Rubbish!
If you earn money from exchanging (trading or selling) coins and tokens, you might owe Capital Gains Tax. If you earn money from staking or mining crypto, you’ll be liable to pay Income Tax on these profits, depending on what you make overall in a year.
We’re glad you asked!
Capital Gains Tax is the tax you owe on profits. You pay it when you sell an asset (e.g. a luxury car, jewellery, a house etc.). For the 2022/23 tax year, you pay CGT at the following rates:
When it comes to crypto, you can earn up to £12,300 tax-free per tax year before you have to pay Capital Gains Tax.
If you owe tax on your crypto profits, you should get the tax return deadline into your diary. You have to file and pay your tax bill on 31st January, the tax year after you started earning from crypto activity. Never filed a tax return before?
Then, the time to learn is now!
First things first, you’ll need to let HMRC know that you’re earning untaxed income. You do this via a process that’s called Self Assessment. You basically just tell HMRC (via online form) the type of income you’re earning and when you started operating.
They will then send you a Unique Taxpayer Reference number (UTR) in the post, which you’ll use to file your tax return.
If you’re earning money from trading crypto, unfortunately you’re not allowed to deduct your business spending from your profits. But if you’re staking or mining, you can. You’re allowed to deduct anything that you use wholly, exclusively and necessarily for your business e.g. mining rigs. Read more about how expenses work.
Something else to make use of if you’re staking or mining crypto is the Trading Allowance. You can earn up to £1,000 in untaxed income per year. You’ll see it applied to your calculation when you use our calculator.
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