The crypto world is bursting with perplexing technicalities and regulations. So let’s break things down and simplify the complex terrain of cryptotax planning in the UK.
By Joshua Pearce – Crypto Tax Specialist
Introduction to Cryptotax
What is Cryptotax? Every time you get a crypto asset (sell, trade, or earn cryptocurrency), the government wants its share in taxes. Cryptotax refers to the taxes owed on any crypto transactions. Proper planning and record keeping can prevent tax issues later on.
Understanding the Basics of Cryptotax
Capital Gains Tax (CGT)
This tax springs into action when you sell your crypto for more than you bought it. Basically, if you made a sizeable enough profit, HMRC wants its share.
Income Tax on Crypto
Did you earn crypto? Maybe through mining or as payment for goods and services? So that’s taxable too. Income tax applies to the value of the cryptocurrency when it was received.
Advanced Cryptotax Strategies
This is where the real magic (and confusion) happens.
It sounds fancy, but in essence, it’s about selling assets that are at a loss to offset the gains from other assets. It’s like a see-saw. If one side is too high (gains), you can balance it with the other (losses).
Using Crypto Loans
Instead of selling your crypto assets and triggering a taxable event, why not use them as collateral for a loan? This way, you get the funds you need without the tax headache.
Gifting Crypto Assets and Inheritance
Gift your crypto assets to loved ones. While there might be inheritance tax considerations, gifting can be a strategic move in certain situations.
Navigating Regulatory Changes
Recent UK Cryptotax Updates
The UK landscape is ever-changing. From tweaks to existing laws to brand-new regulations, staying updated is crucial. Remember, it’s not just about being compliant; it’s about optimizing your strategy within the boundaries of the law.
For savvy investors, these changes can be a double-edged sword. On one hand, they provide clarity. On the other, they might require strategy shifts. Flexibility is key.
Seeking Professional Advice
Navigating cryptotax can be overwhelming. But you don’t have to go it alone. Seeking professional advice can provide clarity and the assurance that you are meeting your obligations with HMRC.
Finding a Cryptotax Advisor
Look for an advisor like me who has a deep understanding of both the crypto world and the UK’s tax landscape.
Cryptotax planning in the UK, while complex, isn’t an insurmountable challenge. With the right strategies and expert advice, you can navigate this terrain like a pro. So if you feel ready to tackle cryptotax with newfound confidence, get in touch with our crypto tax advisors.
- How are crypto-to-crypto trades taxed? In the UK, every crypto-to-crypto trade is a taxable event, with capital gains tax being applicable on the profit or loss in most circumstances.
- What if I only hold my cryptocurrency and never sell? You’re only liable for capital gains tax when you dispose of your cryptocurrency, which includes selling, trading, or using it to purchase items.
- Can I claim losses if my crypto gets stolen or lost? Unfortunately, lost or stolen cryptocurrency cannot be claimed as a capital loss. It’s essential to keep your wallet and crypto assets secure.
- How are crypto gifts taxed? The gift of crypto is a disposal and treated as if you had sold for full value (this doesn’t apply between spouses), the recipient will then be taxed on any growth in value when they later sell.
- What records should I keep for cryptotax purposes? Maintain detailed records of all your crypto transactions, including dates, amounts, the value in GBP at the time of transaction, and wallet addresses. This ensures you’re prepared for any HMRC inquiries.
Ask us about your crypto tax issues and let’s help you to stay on the right side of the law.
Do HMRC know about my cryptoassets?HMRC have been using its information-gathering powers to retrieve lists of investors from various exchanges over the past few years. HMRC have sent ‘nudge’ letters to investors to remind them they may need to pay tax. if you have received a letter please feel free to contact one of our experts to discuss.
How we can helpWe have an experienced team of crypto tax advisors familiar with the unique challenges relating to crypto trading and currency who can provide support with:
- Calculating your taxable gains and losses
- Your annual HMRC filing obligations
- Undeclared crypto gains and disclosures
- Tax planning to ensure that your cryptoassets are properly structured
- Ensuring correct valuations are used for your cryptoasset disposals
- Tax efficient structures for Non-UK domiciled individuals
- HMRC tax disputes and investigations
- Business start-ups in the cryptosphere
Need more advice from a Crypto specialist accountant?We have a lot of information about the UK tax situation for Crypto and NFT on our website which you may want to read before getting in touch.
- Crypto tax FAQ
- Business start-ups in the cryptosphere
- Should I incorporate my crypto trading activities?
- Tax implications of being paid a salary in crypto
- Crypto Day Trading and Tax
- NFTs – the importance of planning
- Tax on crypto staking and lending
- Crypto Tax specialist services
- DAO – Digital Autonomous Organisations
- Ask our UK based crypto accountants for crypto tax advice
- Other crypto insights and services