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Paying Tax on Crypto in the UK: What to Know About Capital Gains Taxes

Patrick Dunstone

Dec 21, 2022 • 5 MIN READ

Last Updated: February 23, 2024

The world of cryptocurrency is exciting and fast-moving, and for many people, it offers a valuable investment opportunity. However, it’s important to remember that, just like any other investment, any gains you make from your crypto holdings may be subject to capital gains tax.

This article will look at what you need to know about paying tax on your crypto in the UK.

What is capital gains tax?

Capital gains tax is a tax that is levied on the profit you make when you sell an asset that has increased in value. In the case of crypto, this means selling a digital currency for a higher price than you paid for it.

The current tax brackets for capital gains tax in the UK are as follows:

  • Basic rate taxpayers (earning under £50,270/year): 10%
  • Higher rate taxpayers (earning over £50,270/year): 20%

Are there any exemptions?

For 2022-2023 filings there is a tax-free allowance of £12,300 per year for capital gains in the UK. For 2023-2024 the allowance is reduced to £6,000 per year. If your total capital gains for the year are less than this amount, you won’t have to pay any tax on them.

However, it’s important to note that this allowance only applies to your total capital gains, not to each asset. So, if you have multiple assets that have increased in value, you may still be liable for tax if the total amount of your gains exceed the allowance.

How do I pay the tax?

If you need to pay capital gains tax on your crypto, you can do so through the UK’s self-assessment tax system. You’ll need to complete a self-assessment tax return and include details of your crypto transactions. You can then pay the tax you owe through the self-assessment system.

What are the deadlines for paying tax on crypto in the UK?

The deadline for paying tax on your crypto will depend on how you file your tax return. The deadline for filing your return online is 31 January 2024. If you file a paper return, the deadline has already passed, on 31 October 2023.

Navigating tax implications of staking rewards

In the UK, staking rewards are subject to income tax rather than capital gains tax, meaning income earned through staking is treated like any other income and taxed accordingly. The amount of income tax due on these rewards depends on the investor’s tax band and can range from 0% to 45%.

However, it’s important to remember that you may receive a staking reward, which then appreciates in GBP before being sold. In this case, any capital gains made from the sale of the staking reward may be subject to capital gains tax. For example, suppose you received £1,000 worth of ETH as a staking reward, and that ETH has appreciated to £1,100 when you sell it. In this case, your capital gains of £100 may be subject to capital gains tax.

Tracking income tax and capital gains tax for staking rewards can be complicated, and investors should keep accurate records and understand their tax obligations.

What software should I use to calculate my crypto gains?

CoinTracker is the leading crypto tax and accounting solution and is now available for UK crypto investors. This tool helps you track your transactions and calculate your gains and losses, making it easier to complete your self-assessment tax return accurately.

What if I don’t pay the tax I owe?

You could face penalties and interest charges if you don’t pay the tax you owe on your crypto gains. In severe cases, you may even be subject to criminal prosecution. It’s essential to take your tax obligations seriously and pay the correct tax on your crypto gains.

The history of capital gains tax

Capital gains tax has a long history in the UK, with the first such tax being introduced in 1965. Since then, the rules and regulations surrounding capital gains tax have evolved, with changes being made to the tax rates and exemptions over time.

The current capital gains tax laws in the UK were last updated in 2023, with changes to the earnings for the basic rate and higher rate. These laws set out the current tax rates and exemptions, along with the rules for calculating and reporting capital gains.

Is there anything else I need to know?

One important thing to remember is that you may be liable for tax on your crypto gains even if you don’t receive the money in GBP. For example, if you sell your crypto for another digital currency, you may still need to pay tax on the gain.

It’s also worth noting that you may be liable for other taxes, such as VAT, on your crypto transactions. It’s always a good idea to seek professional advice if you’re unsure about your tax obligations.

In conclusion, paying tax on your crypto in the UK is integral to being a responsible investor. By understanding your obligations and taking steps to comply with the relevant rules and regulations, you can avoid potential penalties and ensure that you’re making the most of your investment.

Check out our United Kingdom Crypto Tax Guides for deeper insight into HMRC’s crypto rules. If you have any questions, don’t hesitate to reach out on Twitter @CoinTracker, and our team will be happy to assist.

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