Investing in crypto can be both exciting and scary. Part of the scary? Tax.
Yes, the taxman wants a share of your crypto profit. And from 2027, with the new Crypto Asset Reporting Framework coming into force, he’s about to get all over everyone who owns some.
Some people dabble. They spend a hundred quid and don’t do many transactions.
Others have invested much more and are busy switching from one coin to another, looking to make those incremental gains that add up to a bigger win.
And then there are those who have invested hundreds of thousands (or more) and gone for it big time. Some have even invested through their limited companies!
Whatever sort of crypto owner you are, you need to be as serious about crypto tax as HMRC is. Which is where we come in.
What records do you need to keep?
Here’s the bad news about being compliant with the rules: the records you need to keep must show every transaction you make. Not just your initial investment and cashing out, but every buy, sell, exchange, swap, and mining event.
You also need to show the value of each transaction in sterling at the date it happened, and track those transactions against the taxman’s rules.
As if that’s not enough, you lastly need to keep copies of everything for years. Your spreadsheet alone won’t cut it, HMRC wants documentary evidence.
Here at JVCA the friendly accountants, we are crypto tax experts, so we know the rules. More importantly we know how you can keep your records in a way that makes it easy to comply with the rules…and yes that means you need an app! Get in touch to find out more. |
What are the crypto tax rules?
There are three main rules you need to understand.
The 30 day matching rule. You need to identify and match purchases and sales made within a 30 day period. If you sell a Bitcoin and rebuy it within 30 days, you’re not deemed to make any profit or loss. The carrying value stays at the cost of the original coin.
The same day rule. Any sales are matched with purchases made on the same day. Similar to the 30 day rule, this means you can’t just look at individual transactions in isolation when working out your tax.
Section 104 pooling. This is the default rule when neither same day nor 30 day matching applies. You create a pool of coins and use the average cost per unit when working out your taxable profits. Each different coin needs its own separate pool, so if you hold Ethereum, Tether, BNB, and Bitcoin, that’s four pools to track.
Does your record keeping do all of that? If not, you probably need an app!
There is an app that can take data from each of your wallets and from your exchange(s) and from your spreadsheets and put this into a tax compliant order and summary to make your tax return easier. If you don’t already have this and want to find out more, just ask! |
How much crypto tax will you pay?
How much tax you pay depends on how much profit you’ve made, how much you’ve invested, and what trades you’ve done.
The good news is that you have a £3,000 annual allowance that can be used against your crypto profits before you pay any tax.
And that’s not all! Even more good news is that crypto gains are taxed at capital gains tax rates, which are currently 18% and 24% depending on your income. That’s lower than income tax rates.
The bad news? You can make a taxable profit just by switching from one coin to another. Even if you never cash out to sterling, swapping coins counts as a disposal for crypto tax purposes.
Get help before HMRC comes knocking
If you’re looking for a crypto tax expert who can help you get your records in order before the new reporting rules kick in, get in touch. We know the rules, and more importantly, we know how to make compliance as painless as possible.
Need help with crypto tax? Get in touch and let’s sort it out. |
