UHY Ross Brooke Chartered Accountants

Tax implications of being paid a salary in crypto

crypto tax accountant business startup

As increasing numbers of businesses are operating in the crypto space, more employees are being paid in crypto, and consequently we are often asked, how do I pay tax on my earnings?

Most employees in the UK are paid in fiat currency and will be subject to PAYE tax on their earnings when they are paid. This same PAYE rules also apply to any form of payment which is a Readily Convertible Asset (RCA) ie where there is a ready market for the asset that can convert it into cash (whether it is actually converted or not).

Most popular crypto assets would fall under this banner as it can be converted to cash relatively quickly. Consequently the employer would be responsible for calculating and deducting the necessary value of income tax and national insurance from any payment.

However some crypto assets may not be RCAs eg utility tokens that cannot be converted to cash. In those rare situations, although PAYE will not apply the individual will be required to declare the earnings on their self-assessment returns.

Don’t forget that in either case, if the crypto asset is sold, transferred or gifted there is also a capital gains event which may give rise to a gain or loss. Unfortunately if a loss occurs it can only be offset against capital gains in the usual manner and cannot be used to reduce the value of PAYE or income tax on the earnings.

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