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Is there a crypto tax? (UK)

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 cryotoassets like Bitcoin as a personal investment, you will still be liable to pay Capital Gains Tax on any profit you make from them. 

Why is there a crypto tax (UK)?

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. 

In the UK, you have to pay tax on profits over £12,300. 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.

Do I have to be a crypto trader to be taxed?

There are various methods of acquiring cryptocurrency that might make you liable to be taxed:

  • Given to you by your employer as a form of non-cash payment
  • You’re a crypto miner 
  • Your business is back by cryptocurrency (i.e. you trade with crypto instead of fiat)
  • You trade crypto
    • If you trade volumes that amount to what HMRC considers as financial trade, you’ll also be liable to pay Income Tax, although these cases are few and far between

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. 

How much am I taxed?

If your crypto profits exceed the Capital Gains Tax allowance, you’ll have to pay tax at the following rates:

Type of assetBasic rateHigher rate
Shares10%20%
Residential property18%28%
Bitcoin/Cryptocurrency10%20%
Other10%20%

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.

How do I pay tax on my crypto profits?

As with all tax you pay on profits, you’ll have to do a tax return to declare your income to HMRC.

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!

  1. Make sure you register for Self Assessment by 5th October 
  2. Keep a good record of your trading profits and expenses through the tax year
  3. Pay the tax you owe by 31st January
  4. Calculate the tax you owe as soon as you can to prepare for the bill

To help you along the way, take a look at our Capital Gains Tax calculator here.

Where did you get profits?
Profits from capital gains
£
Annual income
£
Outside of capital gains
Select tax year
Profits after tax
£18,560
CGT
£1,440
Profits from selling shares
£20,000
Capital Gains Tax (CGT)
£1,440

First £12,300 are tax-free.

£1,000 taxed at 10%: £100

£6,700 taxed at 20%: £1,340

Your profits after tax
£18,560

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How your capital gains tax is calculated

Your total capital gains tax (CGT) owed depends on two main components:

  1. How much you earn in total
  2. What type of assets you sell

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:

Capital gains tax (CGT) breakdown

You pay no CGT on the first £12,300 that you make

You pay £100 at 10% tax rate for the next £1,000 of your capital gains

You pay £1,340 at 20% tax rate on the remaining £6,700 of your capital gains

Hey there! We really hope this article helped you. Tax matters can be a dreadful topic at times. We know. That's why we started TaxScouts.
A stress-free way to getting your taxes done.

Have a minute? See how it works

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