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What are the taxes on cryptocurrency (UK)?

  • 3 min read
  • Last updated 14 Nov 2022

Cryptocurrency! It’s been a hot topic since the most popular coin ‘Bitcoin’ first skyrocketed to over £20,000 a coin in 2017. But what many people don’t know about crypto is that it dates all the way back to 2009.

… and that there are taxes on cryptocurrency in the UK. But that’s what we’re here for!

What exactly is cryptocurrency?

Cryptocurrency is a form of decentralised digital currency. Although there is no central issuing and regulating authority like with traditional currencies like GBP or USD, there are still taxes on cryptocurrency in the UK.

Do I have to pay income tax on my crypto?

The answer is both yes and no. Not everyone who buys crypto will have to pay income tax on it – but there are some circumstances where you’ll definitely have to, i.e:

  • Your employer pays all or part of your wages in crypto
  • You regularly buy and sell crypto to make short-term profit, i.e a trader
  • You mine crypto (create new coins) as a business

The income tax rates for crypto are the same as the regular income tax rates:

  • 20% if you earn between £12,571 and £50,270
  • 40% if you earn between £50,271 and £150,000
  • 45% if you earn over £150,000

🚨 Bear in mind, if you have to pay income tax on your crypto assets, you’ll also have to pay national insurance contributions on this too. 🚨

Find out more about national insurance contributions here.

Do I have to pay capital gains tax on my crypto?

If you decide to sell or dispose of your crypto and the profitable gain exceeds the threshold of £12,300, you’ll have to pay capital gains tax (CGT) on this profit. Capital gains tax is the most common type of tax on crypto.

There are a few circumstances where you can enjoy your crypto without having to worry about CGT:

  • Your profit from the sale is below £12,300 💸
  • You’re giving/selling your crypto assets to your spouse/civil partner 👩‍❤️‍👩
  • You’re donating crypto to a selected registered charity 🎗️

You won’t have to pay capital gains tax on any asset until you sell or give it away. Then you have until 31st January (following the end of the tax year) to pay.

You can do this by:

There are two rates for capital gains tax for crypto. They’re based on your annual income:

  • 10% is the basic rate (if you earn below £50,270)
  • 20% is the higher rate (if you earn above £50,270)

Do I have to pay inheritance tax on my crypto?

In short, yes. HMRC considers crypto to be ‘property’ for inheritance tax (IHT) purposes. 

So even though you may not physically be able to live inside your crypto coins, if someone passes away and you inherit crypto which exceeds £325,000, it’ll be subject to inheritance tax.

Typically, you’ll pay a flat rate of 40% on the crypto that is over the £325,000 threshold. 

For example:

You inherit £500,000 worth of crypto. The rule is that you have to pay 40% tax on the crypto that exceeds the threshold.

Quick mathematics 🤓:

  • You’d minus the £325,000 threshold from your £500,000 crypto asset which equals £175,000
  • This means £175,000 of your £500,000 crypto is taxable
  • £175,000 at 40% tax = £70,000
  • This leaves you with £105,000 of your £175,000 after tax
  • From your £500,000 crypto asset, you’ll have a new total of £430,000

You won’t have to pay inheritance tax if:

  • The person who receives the crypto is your spouse (love always wins🥹)
  • The crypto is donated to a registered charity
  • The crypto assets have value of less than £325,000

I need tax advice! 😅

Whether it’s to do with cryptocurrency or CGT, our accountants can help. Find out more about our tax advice service here.

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