If a transaction involving cryptoasset exchange tokens is undertaken as part of an existing trade, the profits on the transaction will be included as a revenue receipt in respect of that trade. If mining activity does not amount to a trade, the value of any cryptoassets or fees received for successful mining, less allowable expenses, will be taxable as miscellaneous income. In these circumstance, gains or losses are calculated on a disposal of cryptoasset exchange tokens: for example, where tokens are sold for money or used to pay for goods or services.
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If an individual gives away cryptoasset exchange tokens to a person, the disposal is deemed to take place at market value. Similarly, exchanging them for other cryptoassets or using them to buy goods or services will also be treated as a disposal for tax purposes. Certain allowable costs may be deducted when calculating the gain or loss on disposal, including the consideration originally paid for the asset and the valuation costs incurred to be able to calculate gains or losses.
HMRC says that as for shares the pooling provisions apply to cryptoasset exchange tokens.
In certain circumstances, it may also be possible to claim a loss where the cryptoasset has become of negligible value. However, if an owner loses their private key and can no longer access the cryptoasset, this does not mean it is valueless, and HMRC will not accept a claim for a tax loss.
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The treatment will depend on whether the cryptoassets constitute Readily Convertible Assets RCAs , which will be the case if trading arrangements exist, or are likely to come into existence. Exchange tokens like Bitcoin can be exchanged on one or more token exchanges in order to obtain an amount of money. If the employer cannot deduct the full amount of income tax due from employment income they must still account to HMRC for the balance within 90 days after the end of the tax year. Cryptoassets received as earnings from employment, which do not meet the definition of RCAs, are still subject to income tax and National Insurance contributions.
Exchange tokens are intangible virtual assets and it is only the owner that can access or use them. This means that even if a foreign domiciled individual acquired exchange tokens whilst living in their home country, once that individual is resident in the UK, the exchange tokens will become taxable in the UK if transactions are carried out. Therefore, although it is a helpful steer to their tax treatment, the tax law may evolve over time, as tax disputes over cryptoassets are tested in the law courts.
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Cryptocurrencies: to be or not to be a currency? Article: How cryptocurrencies are taxed for individuals 29 January In guidance published in , HMRC had stated that there are three distinct types of cryptoasset: Utility tokens Security tokens Exchange tokens. Our capital gains tax rates guide explains this in more detail. Or see our Guides , Calculators or Taxopedia. Log in Get started. We sort your Self Assessment for you. Learn more. So, is there a crypto tax in the UK? Why is there a crypto tax UK? Do I have to be a crypto trader to be taxed?
How much am I taxed? How do I pay tax on my crypto profits? Make sure you register for Self Assessment by 5th October Keep a good record of your trading profits and expenses through the tax year Pay the tax you owe by 31st January Calculate the tax you owe as soon as you can to prepare for the bill To help you along the way, take a look at our Capital Gains Tax calculator here.
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Where did you get profits? Profits after tax.
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