Tax on cryptocurrencies


Article by Phil

HMRC has recently started sending out so called “nudge” letters to owners of cryptocurrencies in the UK, notifying them that they expect them to declare and pay tax on any gains. It seems that UK based crypto trading exchanges hold details of the exchanges and HMRC is accessing details from these exchanges to build their own database of ownership. Not many people seem to know this.

HMRC have also published a helpful Crypto assets Manual on their website, which provides all the details about what tax is due and how to pay. However, we are able to summarise some of that information here.

Capital Gains Tax (CGT) is payable on any crypto gains. The tax only kicks in above the annual £12,300 allowance and the rate is currently 10% for basic rate taxpayers and 20% for higher rate taxpayers.

HMRC sets out when the tax kicks in, which is when they are sold, exchanged for another type of crypto or used to buy goods or services. If you haven’t “traded” your crypto then no tax is due unless and until you do even if the value goes up.

You can potentially deduct some expenses from your gains, but these have to be carefully documented and applied in the same way across all types of crypto trading. You might want to speak to a Financial Expert to find out help.

You could potentially have to pay income tax rather than CGT if HMRC thinks that you are being paid in crypto, are trading it for commercial gain or that you are “mining” it, so be careful to understand the differences.

It is your individual responsibility to value your crypto gains accurately. Mostly trading is not in UK sterling so an exchange rate will need to be applied to accurately reflect the value. You are required to document this to HMRC and also to report it to them either directly or as part of your self-assessment returns.

There’s no doubt that HMRC are taking a serious interest in crypto gains and trading given the size of the market and I wouldn’t be surprised if they stated to make an example of those who haven’t paid their tax. We’ve looked at the crypto market many times in terms of its regulation etc, but these new and clear HMRC rules are bringing it more into the mainstream, even though it remains high risk.


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