Is crypto taxable? Yes! And according to a survey commissioned by HMRC, 59% of crypto currency investors didn’t think it was – so don’t be caught out! If you are invested in crypto currency then you need to declare this to HMRC … and some people will need to declare this every year. This article is intended to be a practical and pragmatic guide to tax on crypto currencies.
With around 10% of the UK holding some crypto currency – and the potential for big profits and losses – this is getting to be a bigger issue than ever before. This article is there to help provide some basic crypto tax knowledge. As ever, take advice about your bespoke circumstances if you are in any way unsure, as this is just general information.
1) Selling or swapping a crypto currency is potentially taxable – which means you need to keep a track of every purchase, every currency swap and every sale, as well as your investment from GBP and any cash you have taken back out. That list needs to include the sterling value of each transaction you do. For example, you might buy Bitcoin and then swap to Ethereum and back again to Bitcoin. For tax purposes that is three distinct transactions. So you need a comprehensive list from when you first invested, and totalled by tax year.
2) Every time you sell or swap out from a currency, any profit you make is potentially taxable – even if you don’t take that profit out of your crypto account, but leave it invested in crypto currency. The really good news is that HMRC taxes crypto as capital gains tax, not income tax. You get an annual tax-free allowance for both income tax and capital gains, which means you will only have a tax bill if your profits go over the tax-free amount (currently £12,300pa).
3) From your list of sales, swaps and purchases you will undoubtedly have made some losses. Losses reduce your profits. If you have more losses than profits in a tax year then they can be carried forward to the next year. If you don’t use them in that year the losses can be carried forward, and so on.
4) There are some apps that track and list out your crypto movements, making it really easy to have the information ready to work out if you have a tax bill. If you have even an averagely complex crypto history, then this could be very worthwhile.
5) You will only have a tax bill, need to do a tax return and tell the taxman if your capital gains – ie from all sources including crypto currency – exceed the tax free allowance, currently £12,300pa.
Is your crypto taxable? Need help sorting your crypto gains, and telling the taxman? Get in touch with us. Here at JVCA the friendly accountants we are crypto tax experts, so get in touch: Contact Us