Frequently Asked Questions

Yes, HMRC considers cryptocurrency to be an asset, meaning it is subject to taxation. If you sell, trade, or gift crypto (excluding gifts to a spouse), you may need to pay Capital Gains Tax (CGT) on any profit. If you receive cryptocurrency through mining, staking, airdrops, or as payment for services, this is classed as taxable income and subject to Income Tax and National Insurance contributions.

As of April 2024, the Capital Gains Tax (CGT) rates have changed:

• Basic rate taxpayers: 18% (increased from 10%)
• Higher rate taxpayers: 24% (increased from 20%)

The CGT annual exemption has also been reduced to £3,000, meaning gains above this threshold will be taxable. Residential property disposals continue to be taxed at higher rates (18% and 24%).

The current tax bands for England, Wales, and Northern Ireland are:

• Up to £12,570 – 0% (Personal Allowance)
• £12,571 to £50,270 – 20% (Basic Rate)
• £50,271 to £125,140 – 40% (Higher Rate)

Over £125,140 – 45% (Additional Rate)

If you owe tax on crypto transactions, you must report it in your Self Assessment tax return:

• Paper returns: Due by 31st October following the end of the tax year
• Online returns: Due by 31st January following the end of the tax year

Late filings can result in penalties and interest charges.

Yes, HMRC actively monitors crypto transactions. It has agreements with crypto exchanges and financial institutions requiring them to share user data. HMRC also utilises blockchain analysis tools to identify taxable activities, so failing to report gains or income could lead to penalties.

HMRC considers the following activities as taxable events:

• Selling crypto for GBP or other fiat currency
• Exchanging one cryptocurrency for another
• Using crypto to pay for goods or services
• Gifting crypto (unless to a spouse or civil partner)
• Receiving crypto from mining, staking, airdrops, or as payment

Each of these may trigger either Capital Gains Tax or Income Tax, depending on the transaction type.

HMRC distinguishes between investors and traders:

• Investors: Typically liable for Capital Gains Tax when disposing of crypto assets
• Traders: Engaging in frequent crypto transactions in a structured manner may be classified as a trading business, meaning profits are subject to Income Tax instead

The classification depends on factors such as trading frequency, organisation, and intent.

To comply with HMRC, it is essential to maintain records of all crypto transactions, including:

• Dates of each transaction
• Type and quantity of cryptocurrency involved
• GBP value at the time of the transaction
• Purpose of the transaction (trade, sale, payment, etc.)
• Associated fees (e.g., exchange fees, network fees)

Accurate record-keeping is essential for tax calculations and compliance.

Operating through a limited company may have tax benefits, such as paying Corporation Tax (currently between 19% and 25%) instead of personal Income Tax rates. However, it also comes with additional responsibilities, including company tax returns and reporting requirements. A tax adviser can help determine the best approach for your specific situation.

There are legal ways to minimise your crypto tax bill, including:

• Using your CGT annual exemption (£3,000 for 2024/25)
• Offsetting losses against gains to reduce taxable income
• Holding crypto instead of frequent trading to avoid higher tax exposure
• Gifting assets to a spouse (who may be in a lower tax bracket)
• Strategically planning disposals to take advantage of lower tax rates

We at Crypto UKTax  can help structure your investments in the most tax-efficient way.