Now we’ll see different specific cases of cryptocurrency taxation in UK, so that we’ll try to cover many examples – in some of these cases you could find yourself there too. The cost of acquisition signifies the amount the taxpayer paid to acquire their cryptocurrencies, inclusive of any transaction fees incurred. If your mining activities can be classed as a hobby, any income must be declared under miscellaneous income when you fill out your tax return. Crypto traders and investors need to be aware of the wide array of transactions ranging from basic purchase and sell orders all the way through to hard forks, airdrops, staking and more. Treasury have 30 days from the disclosure date to make all necessary payments.
Helpful Strategies for Crypto Taxation
- As of November 2023, FCA doesn’t directly regulate exchange tokens and utility tokens but does regulate security tokens.
- After this specific timeframe elapses, individuals lose the opportunity to officially register these losses and leverage them for offsetting against prospective capital gains in subsequent years.
- For example, you can potentially reduce your tax burden if you sell your crypto in a year when you are studying in university full-time.
- However, you have a four year time limit to register your capital losses.
- Such software can simplify the complex calculations and ensure accurate reporting.
You can write off the fair market value of your crypto at the time of the donation. It’s important to remember that you need to ‘realise’ your loss to claim it on your return. Examples of realising your loss include selling your crypto, trading it for another cryptocurrency, or using it to make a purchase.
What counts as an allowable cost
The capital gain is calculated based on the difference between the selling price and the original purchase price or the ‘cost basis.’ The resulting profit is subject to capital gains tax. Mining cryptocurrency as a hobby incurs the same problem as airdrops, hobby miners will be taxed twice. They will be required to pay income tax when they receive their mined tokens, and consequently, pay capital gains tax on any gain after the disposal. In conclusion, navigating the world of cryptocurrency taxation in the UK can be a daunting task.
Claiming losses on worthless assets/lost keys
Instead, HRMC has, since 2018, issued guidance on how to wrap the existing tax code around crypto. Its guidance outlines how cryptocurrencies are not considered currency or money, but property. To better understand how airdrops are taxed, consider the 2021 $ENS airdrop. In this case, anyone who previously used the Ethereum Naming Service was entitled to claim $ENS tokens.
Lastly, if you are the owner of a company or a partnership and you dispose of or sell cryptocurrency, the gains may be subject to corporation tax instead of capital gains tax. The current corporation tax rate in the UK is 19%, but it is advisable to consult with a tax advisor to understand the specific implications for your business. Navigating cryptocurrency taxation can be challenging, but tools like CoinTracking simplify the process. This software streamlines the tracking and reporting of crypto transactions, ensuring compliance with tax regulations. As the crypto landscape evolves, it’s essential to stay informed and utilize reliable tools to manage tax obligations effectively. As the cryptocurrency market matures, the UK’s HMRC has established clear guidelines on tax rates and allowances for crypto transactions.
Government activity
It’s also vital to keep accurate records of your transactions, including the dates and amounts. If the quantity sold exceeds the quantity bought on the same day, the Crypto Taxes in the United Kingdom investor must proceed to the next rule. In the UK, capital gains tax is applied to any profit made from selling or disposing of an asset, including cryptocurrencies.