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What are the rules for declaring cryptocurrency on taxes (UK)?

  • 3 min read
  • Last updated 29 Jan 2024

Hitting big with crypto? Figured it’s time to start making tax preparations? Then you’ll probably need to know the rules for declaring cryptocurrency on taxes in the UK.

We got you! 👊

Do I have to declare crypto on taxes (UK)?

Probably! Many crypto investors will have to report their crypto earnings to HMRC, but not all. These are the most common grounds for needing to declare crypto assets:

Buying and selling crypto

If you’re buying and selling crypto for short term profit, HMRC will consider you to be a day trader. You’ll be taxed in line with the regular income tax rates.

So that means if you hold onto your crypto instead of day trading, you won’t have to report it, right? 🤔

Ermmm, not exactly.

If you hold onto your crypto and decide to sell later on, as long as the profit you make from it exceeds £3,000 in the tax year 2024/2025 (previously £6,000 in the 23/24 tax year), you’ll have to pay capital gains tax

There are two ways to report and pay capital gains tax:

Remember, you only pay capital gains tax on what you earn above the £3,000 threshold. Not the entire amount.

As a general rule, you can follow this chart and see where you fit in and what taxes you’d have to pay:

crypto tax uk

Inheriting over £325,000 worth of crypto

Crypto is classed as ‘property’ when you’re dealing with inheritance tax (IHT). With the rise of the metaverse, perhaps we can expect crypto houses in the near future? 🏘️

What this means in terms of tax is that if someone passes away and leaves you over £325,000 in crypto assets, the earnings above £325,5000 will be taxed at the standard IHT rate of 40%. 

There is one exception: if you inherit this from your spouse, then you won’t have to pay IHT.

Being paid wages in crypto

Crypto has become so popular that some employers are even opting to pay wages fully or partially in crypto. Innovation at its finest! 🤌

But just because it’s not a traditional currency like GBP, it doesn’t mean you escape paying income tax. Your crypto will simply be treated like cash. So your crypto wages will be taxed at the regular income tax rates.

Old skool filing your tax return on paper? 

You have to report all your crypto as part of your Self Assessment tax return. If you’re filing by post, you’ll need to:

👉 Report any income from crypto in the Self Assessment tax return using the SA100 form

👉 Report any capital gains or losses from crypto in the Self Assessment: Capital Gains Summary (SA108) and attach with your SA100 form

👉 Remember that the deadline to file your Self Assessment tax return online is 31st January

On the other hand, you can complete your tax return online. Read our guide for a quick rundown on how to register for Self Assessment.

What happens if you don’t declare your crypto profits?

Not declaring crypto on your tax return is pretty much the same as not declaring any other earnings – grounds for a penalty from HMRC. 

Of course, mistakes happen i.e you genuinely didn’t know you had to declare your crypto income. In this case, your best bet is to let HMRC know as soon as you become aware!

It’s better to let HMRC know before they find out.

How does the government know you have cryptocurrency?

Crypto is unregulated, so you might assume that HMRC has no insight into your activities. But think again! 

Back in 2019, HMRC went on a crypto investor hunt, digging up anyone who made big bucks when crypto was at its peak and didn’t report or pay tax on their profits.

HMRC now receives information directly from both crypto exchanges and the Common Reporting Standard.

So yes, big brother is watching. 👀

Filing a crypto 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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