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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.
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.
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:
|Type of asset||Basic rate||Higher rate|
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 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!
To help you along the way, take a look at our Capital Gains Tax calculator here.
First £12,300 are tax-free.
£1,000 taxed at 10%: £100
£6,700 taxed at 20%: £1,340
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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 £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
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