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So, is there a crypto tax in the UK?
Whilst cryptocurrency is a relatively new asset, the regulations surrounding it are still being formed. HMRC doesn’t consider cryptoassets to be a form of money, whether exchange tokens, utility tokens or security tokens. However, when it comes to taxing them, it depends on how the tokens are used.
Bitcoin is an exchange token and, like many other exchange tokens, is used as a method of payment. So if you hold cryptoassets like Bitcoin as a personal investment, you will still be liable to pay Capital Gains Tax on any profit you make from them.
At different points in the ten year history of cryptocurrency, Bitcoin has fluctuated significantly in value. Those who bought Bitcoin back in 2008 when it was worth fractions of a dollar could potentially have made hundreds of millions of dollars in profit in 2017 when its value peaked at almost $20,000, or in 2021 when it peaked at $67,000 🤯
In the UK, you have to pay tax on profits over £6,000 (2023/24). And so irrespective of your view on the validity of cryptocurrency, you will always be liable to pay tax on your investment profits from them.
There are various methods of acquiring cryptocurrency that might make you liable to be taxed:
When you trade crypto, unlike some forms of forex trading, HMRC does not class it as gambling. As a result, you’re always liable to pay tax on your profits.
If your crypto profits exceed the Capital Gains Tax allowance, you’ll have to pay tax at the following rates:
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Be aware that these rates are subject to change each year. Make sure that you stay abreast of any changes to CGT rates when you put money aside to do your tax return.
As with all tax you pay on profits, you’ll have to do a Self Assessment tax return to declare your income to HMRC and pay the correct amount of crypto tax.
If you’ve never done one before, don’t worry. The process isn’t too complicated if you know what you’re doing. Follow the below steps and you’ll be on the right path!
To help you along the way, take a look at our Capital Gains Tax calculator here.
Your total capital gains tax (CGT) owed depends on two main components:
Your overall earnings determine how much of your capital gains are taxed at 10% or 20%.
Our capital gains tax rates guide explains this in more detail.
In your case where capital gains from shares were £20,000 and your total annual earnings were £69,000:
You pay no CGT on the first £12,300 that you make
You pay £127 at 10% tax rate for the next £1,270 of your capital gains
You pay £1,286 at 20% tax rate on the remaining £6,430 of your capital gains
At TaxScouts, our accredited accountants require a couple of things to get started on your Self Assessment tax return. A quick heads up – it’s not possible for our accountants to use a transaction summary to calculate the CGT you owe. This is because transaction summaries contain hundreds – sometimes thousands – of individual transactions! Our accountants do need to see the proof of transactions to compare them with your totals, but they can’t take this alone. To make the whole tax return process quick and smooth, please send them:
So, yes, they need both. And if you’re curious or confused as to what a CGT report is, it’s simply a compressed version of your transaction history. We have a bunch of partners who are able to help you with this, and if you take a look at this guide, you’ll be able to read more about filing a crypto-specific tax return.
Well, listen up. We teamed up with Koinly to bring you a quick and easy solution: a tool to create crypto tax reports. Want to get your crypto tax report generated and tax return filed all in one? Look no further. Up to 1000 transactions totally free!
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