How Are Crypto Currencies Taxed in the UK?

Here’s what you need to know about crypto currency tax.  As cryptocurrency becomes more popular, small business owners are wondering how it is taxed in the UK. Although crypto currency is not currently recognised as legal tender in the UK, it is still subject to capital gains tax.  

Crypto Currency and Capital Gains Tax

The first thing to understand is that crypto currency is considered an asset for tax purposes. This means that if you sell your crypto currency for a profit, you will be subject to capital gains tax. However, if you sell your crypto currency at a loss, you may be able to offset other capital gains you have made during the year.

It’s important to keep good records of your crypto currency transactions so that you can properly calculate your capital gains (or losses) when it comes time to file your taxes. Many people use specialised software or accounting services to keep track of their crypto currency taxes.

It can also be very difficult months after the transaction to pull off the required data from your wallet, therefore it is best to do it at the time of the transactions. 

Income Tax on Crypto Currency

In addition to capital gains tax, you may also be liable for income tax on any interest or dividends you earn from your crypto currency investments.

For example, if you receive payments in Bitcoin in exchange for goods or services you provide, those payments will be subject to income tax.

Similarly, if you hold a “mining” rig which generates new Bitcoin, the Bitcoin income you receive will be subject to income tax.

Depending on the amount of income you generate from your crypto currency activities, you may be eligible for certain tax breaks such as the self-employment allowance.

Crypto Currencies Taxed - How to report and pay 

You can report your gain:

• in a Self Assessment tax return; or
• using the ‘real time’ Capital Gains Tax Service

Cryptocurrency is becoming increasingly popular, but many people are unaware of how it is taxed in the UK. Cryptocurrency is treated as an asset for capital gains tax purposes, which means that profit from selling cryptocurrency is subject to capital gains tax. In addition, any interest or dividends earned from cryptocurrency investments are subject to income tax. 

Keep good records of all cryptocurrency transactions in order to correctly calculate your taxes owed when filing your return.

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