Crypto Tax UK Guide Chartered Accountants London

Crypto Tax UK Guide Chartered Accountants London

For more information about how this applies in the context of cryptoassets, see below How does being non-domiciled in the UK affect tax on cryptoassets?. However, if airdrops are received in return for carrying out a service, they will in fact be subject to income tax and classed as miscellaneous income, or trading profits . Individuals may want to treat it as savings income and claim personal savings allowance to further reduce taxes due. Speak with a tax accountant if you consider this, as capital gains tax rules may apply if you dispose of it at a later date. For those who have received a letter from HMRC out of the blue, the prospect of being chased by the tax authorities is of course a scary one.

how to avoid tax on cryptocurrency uk

If you invest in cryptoassets then you may make taxable gains or profits, or losses. You might also earn taxable income in the form of cryptoassets for certain activities. The most straightforward way to make money from crypto is to buy tokens at a certain exchange rate, wait for the value relative to ‘real’ money to rise and then sell the crypto assets for a profit. Because the value of crypto can rise and fall like any other currency, or stocks and shares, investors can gain or lose money. Individuals not treated as trading will be subject to CGT on the profits they realise on disposing cryptocurrencies.

UK tax treatment

It’s unclear if Binance specifically reports to HMRC, but according to sources online exchanges such as Coinbase and eToro, to name a couple, have had letters requesting customer data. With more and more people holding Bitcoin, Ethereum and other cryptocurrencies, the question of how to avoid Capital Gains Tax on crypto is never more relevant. If you make a loss on miscellaneous income then the loss can be carried forward to be deducted from miscellaneous income in the future. You do not have any other trading or miscellaneous income in the year. Airdrops are when someone who has a cryptoasset wallet receives some of a certain kind of cryptoasset for some reason.

how to avoid tax on cryptocurrency uk

You need to report your taxes for this financial year by the 31st of January 2022. To try and simplify this a bit more, a lot of your DeFi trades are going to be seen as disposals now. This includes adding/removing liquidity, staking crypto and in some instances the rewards you receive from DeFi protocols – if you receive that reward in one large sum .

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You’ll need to work out the pooled cost every time you buy or sell tokens. You pool the cost of your tokens in the same way you pool costs for how to avoid crypto taxes uk shares. Finally, Mr Cannon is cautioning Britons who are unaware of HMRC’s all-seeing eye, which can easily spot those who are due to pay tax.

This will help you take advantage of the best legal loopholes for your situation. Tools like Koinly, TokenTax, and CoinTracker can scrape data from exchanges to help work out your tax bill. Some tools also include a free crypto tax calculator for the UK to help you work out your profits and liabilities.


If you bought new tokens of the same type within 30 days of selling your old ones, the rules for working out the cost are the same as the rules for shares. Hobby miners will pay Income Tax on mined coins, as well as Capital Gains Tax when they later dispose of those mined coins. Meanwhile, for business miners, mining income will be added to trading profits and be subject to Income Tax. HMRC has now issued rules on DeFi transactions, focusing on lending and staking. The guideline now indicates that DeFi transactions may be subject to Income Tax or Capital Gains Tax depending on the “nature of the transaction” and whether it is of the capital or income variety. If your DeFi activities have the ‘nature of income,’ they will be taxed.

  • As such, they will be liable for inheritance tax in the same way and inheritance tax planning should be considered.
  • Earning new crypto tokens through yield farming on lending protocol like AAVE, Compound.
  • Where cryptoassets are received as employment income, these are classified as money’s worth (as they are “something that is capable of being converted into money or something of direct monetary value”).
  • Also the tokens need to be converted into GBP sterling at the time of each transaction (i.e. purchase or sale) and their market value needs to be ascertained.
  • Whatever your situation, before you delve deeper into the world of cryptocurrency or bitcoin, it’s wise to understand how HMRC taxes them.
  • Keep in mind that when you sell this cryptocurrency, you will be subject to Capital Gains Tax.

Although if you have lost your private key, you cannot claim a capital loss, you can make a negligible value claim. If your claim is accepted, you will, at a later stage, be able to claim it as a capital loss. If you already earn over the personal allowance of £12,570, you’ll need to pay at least 20% tax on your crypto income. Donating assets and cash to charity increase your basic rate income tax at the top end meaning more of your CGT liability will be charged at the lower rate. This is also a useful strategy for reducing any Inheritance Tax liability as well.

Check which rate of Capital Gains Tax you need to pay

This frees you from the tax liability and passes it on to the recipient of the asset. Note, these ways of mitigating CGT apply to individuals who hold crypto as a personal investment. Different rules apply if you’re an active trader, and additionally you may be liable for Income Tax. CGT is a tax you pay to HMRC when you make a profit on assets such as cryptocurrency, shares, second homes and many other investments. If you are receiving cryptoassets as income , the question is usually whether that income is treated as ‘trading’ income or ‘miscellaneous’ income. HMRC say that whether such activities amount to a trade depends on factors such as the scale of activity, organisation, risk and commerciality.

how to avoid tax on cryptocurrency uk