Cryptocurrency (also called “crypto”) is a form of decentralised digital currency. It only exists online and there are now over 1500 different cryptocurrencies in existence. They are governed independent of any bank or government (a.k.a decentralised) which is the main difference between crypto and traditional (fiat) currencies.
Is crypto the same as online cash?
In short, no. Crypto is not the same as the money you have in your online bank account.
A few examples of popular cryptocurrencies are:
What tax do you pay if you own cryptocurrency?
If you earn cryptocurrencies through mining, this counts as income from self-employment.
On earnings over £1,000 from self-employment, you might need to pay Income Tax and National Insurance on the value of the mined crypto (calculated in GBP); however, it’s possible to expense mining costs. This can be your computer, electricity, bookkeeping etc., but only if cryptocurrency trading is your business as opposed to a hobby.
If you make a profit from selling cryptocurrencies (e.g.on an exchange), you need to pay Capital Gains Tax on any profit over £12,300. If you make a loss, you can “carry this loss forward” and claim it next year.
- Mined cryptocurrency – you’ll claim this as an expense against your income
- Sold cryptocurrency – you’ll claim this as a profit
How to pay tax on cryptocurrency?
It’s really simple. You just complete a Self Assessment tax return.
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