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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!
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.
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:
The income tax rates for crypto are the same as the regular income tax rates:
🚨 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.
If you decide to sell or dispose of your crypto and the profitable gain exceeds the threshold of £3,000 in the 2024/25 tax year (previously halved from £6,000 in the 2023/24 tax year), 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:
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:
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.
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 won’t have to pay inheritance tax if:
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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