Last Updated: January 20, 2023
Cryptocurrency Tax Filing in the UK
Tax filing can be time-consuming and confusing, even for the savviest investors. Ensuring your “regular” taxes, such as income tax, are filed correctly, and all up to date can be an arduous process, let alone the unknown and new world of cryptocurrencies and their taxation requirements. As a highly-established company in the crypto tax space, the team at CoinTracker are here to help.
CoinTracker – A Universal Approach & Thought Leader
Whether you are a seasoned crypto investor or are entirely new to the industry, we can help. Regardless of the size of your investments and experience, crypto tax filing can be stressful and create uncertainty. A user-friendly and seamless platform is essential to alleviating these pain points.
CoinTracker is the global leader in cryptocurrency tax, and we are committed to improving awareness and education on the taxation of this exciting asset class. Figuring out how to approach crypto tax requirements can be daunting, so our objective is to make this a simple and hassle-free process for all our customers. We want to assist and encourage more people to enter the world of crypto, knowing that they can confidently embark on this journey knowing that the portfolio tracking and taxation elements of their investments are taken care of.
A Guide to Filing Your Crypto Taxes in the United Kingdom
Every country has different rules and regulations for filing taxes related to cryptoassets. It’s still early days for cryptocurrency taxation in the United Kingdom. This simple guide will help you remain compliant when filing your taxes and ensure you maximize cost efficiencies throughout your tax return.
In the UK, His Majesty’s Revenue and Customs (HMRC) do not consider cryptocurrencies a form of money or currency. Instead, they are classed as an asset, just like property or shares owned in a company. As a result, investors would be subject to Capital Gains Tax (CGT) when selling their cryptocurrencies. Most crypto investors will qualify for CGT; however, for those involved in high volume or day trading, the HMRC would instead require Income Tax to be paid on trading.
Capital Gains Tax
This is what will apply to the majority of investors. With a Capital Gains allowance of £12,300 (£6,000 from April 2023), any profits under this amount will be exempt from taxation. However, if you sell your cryptocurrency for cash or swap it for another cryptocurrency, and the total profited amount is above £12,300, you will be liable for tax.
You will need to fill out a Capital Gains Tax summary form along with your tax return and disclose your profits by calculating the amount you sold your cryptocurrency for minus any costs associated with purchasing it. This would include purchasing the cryptocurrency itself along with any transaction fees. The amount of Capital Gains Tax you pay will depend on your Income Tax band. For example, someone on a Higher Rate income tax band (up to £150,000) would have to pay Capital Gains Tax at 20% (after deducting the £12,300 tax-free allowance). In the case of someone earning £75,000 in annual income who makes £20,000 in profit on their cryptocurrency, they would pay 20% tax on (£20,000 - £12,300) £7,700.
If you are a cryptocurrency trader and earn cryptocurrency in the UK, you will need to pay Income Tax and National Insurance in the same way as if you were paid in pounds sterling.
The first £12,750 you earn in a financial year is free of tax; anything above this will be subject to income tax. This means if you receive payment from your employer in cryptocurrency, mine it, receive interest/yield or staking rewards, those earnings will fall into the Income Tax category. The next step would be to check what proportion of your cryptocurrency would be considered income by HMRC and then calculate the Fair Market Value (FMV) of your cryptocurrency income. CoinTracker’s tax calculator is a valuable and speedy tool for calculating this. The FMV would be the amount your crypto would have been worth on the day you received it. With this pound sterling figure established, you can then calculate the rate of tax you should pay based on the band you fall into (Basic Rate, Higher Rate or Additional Rate).
Simplify the Process With CoinTracker Today
Whilst cryptocurrency taxation is a relatively new concept in the United Kingdom, it is crucial to understand the tax implications and stay up to date with the rules and regulations outlined by HMRC. The amount of tax you pay will depend on whether you fall into the Income Tax or Capital Gains Tax category. The actual amount you pay will depend on your income tax band alone (allowing for your tax-free allowance of £12,300). At CoinTracker, we fully understand the ins and outs of crypto taxation, so let us do the hard work to simplify and speed up the process for you.
Check out our comprehensive guidance on UK crypto tax for deeper insight into HMRC’s crypto rules. Let us know your questions and feedback on Twitter @CoinTracker.