Crypto Tax UK: A Guide
The UK is one of Europe’s biggest crypto hubs, with $170 billion in crypto deals now in place. Crypto is becoming more and more popular, but the tax situation remains opaque and complex for many, often preventing new entrants to the space.
In this guide, we’ll talk about what kind of crypto tax UK citizens have to pay, how to pay them, and how to save money while doing so.
Table of Contents
How is Crypto Taxed in the UK?
Crypto is viewed as property in the UK and subject to capital gains tax when sold for a profit. Income received in crypto is also subject to income tax.
Who Gets Taxed on Crypto in the UK?
Here’s a list people liable for crypto taxes in the UK:
Traders
Traders owe capital gains tax on their profits. The first £6,000 of profits made per year are not subject to any tax. This was cut from £12,300 as of April 2023, as cited in the Autumn Treasury Statement. After this £6,000 range, you’ll pay either 10% or 20% tax on profits, depending on what income tax bracket you fall into as well as the transactions you’ve made.
In higher volumes, traders may also be required to pay income tax on their earnings as well, although this is rare. Unlike some kinds of forex trading, crypto trading is not classed as gambling in the UK and has no gambling tax exemption.
Miners
Crypto mining as a business is taxed in the same way as crypto trading, shown above. The proceeds of professional crypto mining are subject to capital gains tax.
Employees receiving crypto salary
Crypto businesses
If you’re running a crypto business, all the regular taxes apply whether you’re dealing in crypto or fiat, and your crypto is subject to capital gains tax when sold for a profit.
Heirs to Crypto Assets
If you’ve inherited crypto from someone’s estate, you’ll owe inheritance tax on sums above £325,000. A £500,000 inheritance would be taxed £70,000 (40% of £175,000).
How to Pay Crypto Tax UK
Keep a record of all your crypto transactions (use one of the software solutions we recommend later in the article if you need to). Your taxes are due on January 31st — calculate the tax early to prepare for your bill on time.
What Constitutes a Taxable Crypto Event in the UK?
When you sell crypto, whether it’s for fiat or another crypto, you’re creating a potential taxable event. This is also the case for earning crypto in the scenarios mentioned in the previous section. It’s important to be aware that when you sell crypto for a loss, you may be able to deduct this loss from your final tax bill.
Can HMRC track crypto?
Yes, HMRC can and does track crypto. Most exchanges have KYC (know-your-customer) rules requiring users to submit user ID and proof of address, although this does not apply to non-KYC exchanges.
Coinbase recently issued emails stating that it was working with the HMRC to provide user information to the government so that its users would be properly taxed.
Is any crypto tax free?
Crypto profits under £6,000 pounds are free from capital gains tax. Beyond that, it’s advised to consult an accountant or tax lawyer to take a look at your specific situation, as crypto taxes depend on your income bracket and the nature of your crypto transactions.
Crypto Tax Software for the UK
Crypto taxes are complex enough that it can be worth using accounting software, especially for traders who need to keep track of a high volume of transactions.
Recommended accounting software for crypto in the UK include:
Spending Crypto in the UK
Crypto is getting easier and easier to use, with crypto tax software, multiple exchanges to choose from, and platforms like CryptoWallet.com that not only sell crypto but let you spend it as well!
We’re launching a crypto card in 2023 that allows you to spend over 800 cryptos directly with no conversion required. Sign up to the whitelist here!