Is cryptotrading the same as NFTs for tax purposes?
Yes, when we talk about crypto assets, we also include crypto currencies and NFT (non-fungible token) assets such as digital artworks.
Can I gift my crypto assets tax-free?
Only if you gift them to your spouse or civil partner. Otherwise you may be liable to CGT, depending on their value. In addition there may be Inheritance Tax (IHT) implications if you die within 7 years of making the gift.
If I am paid in crypto under PAYE, what is my tax position?
It’s the employer’s obligation to report the pay to HMRC and make the necessary deductions.
It’s not possible to report salaries to HMRC in terms of crypto so for the calculation of deductions everything has to be converted into £ sterling.
Tax and national insurance will be calculated on the £ sterling value and the employee is then paid the net amount in crypto.
What’s treated for Income tax in the UK?
If you are paid in crypto, or receive staking rewards, mining tokens or Airdrops, these will be treated as income and you will be liable for income tax at your normal rate. These are the transactions on which HMRC has issued specific guidance, but the crypto environment is always changing.
You can also assume that income could include:
- Lending your crypto to earn interest, yield farming or earning dividends
- Referral rewards
- * to earn eg watch to earn, learn to earn, play to earn, shop to earn.
Do self-employed people have to pay tax on their wages paid in crypto currencies?
Self-employed people who receive crypto for their services must report the value of the crypto converted into £ sterling at the date of the transaction and will be assessed for income tax under self-assessment on that amount.
How much detail do I need to keep on my crypto / NFT transactions?
Good record keeping is essential to keep track of your crypto and NFT transactions and most likely some of the apps on the market will be required. You may find that the amount of transactions and detail of the records that you need to keep increases rapidly, so it’s worth preparing early on. Don’t rely on an Excel spreadsheet.
As with other traditional assets, you need to keep your records for 7 years for HMRC. Read more about the records you need to keep
What Crypto software is available?
Koinly, cryptotaxcalculator.io, Coin Tracking, BitcoinTaxes and Accointing and are among the more popular ones with our clients. There are issues with the software, including:
- They can use different rates of exchange
- Difficult to track assets when they move between brokers and wallets
- Volume of transactions
Does HMRC really know about my crypto assets?
It’s safest to assume they do. We know that a number of crypto exchanges including Coinbase, eToro and CEX have been reporting transactions to HMRC for a while, and we expect that all the other major exchanges such as Kraken, Bittrex and Binance are too.
HMRC has the Know your customer (KYC) information you provided when your signed up for a UK exchange or wallet. Many crypto asset owners have already had a letter from HMRC reminding them about Capital Gains Tax.
What’s the minimum amount I have to declare to HMRC?
Whenever the crypto currency is spent, withdrawn or exchanged for another crypto there are capital gains tax (CGT) implications. So whether you are buying a coffee or a car, you could be liable for CGT. So long as you only hold your crypto assets and do not spend them or cash them in, there is currently no UK CGT to pay.
Can I avoid paying tax on cryptocurrency?
There are legal ways to reduce the amount of tax you pay on crypto, but it’s complicated and you need to discuss this with our specialist crypto tax accountants.
Can I report and pay money to HMRC in cryptocurrencies?
No. Any crypto transactions have to be converted into £ sterling at the date of the transactions and all tax due must be calculated and paid, in £ sterling.
Can I use crypto in my business?
Yes you can. Some businesses use crypto currencies or NFTs to pay their staff and make transactions for their goods and services. You still need to pay your taxes though! If you’re starting up a crypto business, here’s what you need to consider.
Should I incorporate my crypto business activities?
You will need to consider the nature of the income, your personal tax position, and the intention for the income or gains? Find out more
Who can help me with my crypto accounts?
UHY Ross Brooke have a specialist crypto tax team, and some of our staff hold crypto assets too, so you can be confident that we know how to keep you on the right side of the law, while reducing your tax burden.
More information and get in touch
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