Crypto Tax UK: A 2023 Guide with HMRC Rules

You need to keep accurate records of your crypto transactions, such as the date, type, and value of the crypto, so you can compute whether to pay income tax or CGT. On 1st July 2023, you receive an airdrop of 200 UNI tokens, with an FMV of £2 each. So, the total value will be (200 x £2) £400 at the time of receipt. You received these tokens because you had conducted trades on Uniswap. A tax-free crypto event is a transaction that does not result in a gain or loss from the disposal of crypto assets for tax purposes.

Crypto Tax Rates and Allowances

Many DeFi protocols, on the other hand, now give you a token in exchange for your share of the liquidity pool. This could be viewed as a crypto-to-crypto swap, in which you exchange one asset for another, which is subject to Capital Gains Tax. In the United Kingdom, there is no Bitcoin or cryptocurrency tax. Instead, your cryptocurrency will be subject to either Capital Gains Tax or Income Tax. If you bought Bitcoin for £20,000 and sold it for £30,000, your capital gain would be £10,000 (£30,000 – £20,000).

Spending crypto on goods and services

• In Scenario A, you have a gain of £3,000, while in Scenario B, you have a loss of £2,000.
• The Same Day Rule and the Bed & Breakfast Rule are designed to prevent investors from claiming losses solely for tax purposes.
• This means you should report the interest received as miscellaneous income on your tax return.
• For example, some protocols may require you to deposit ETH to receive stETH.
• Capital Gains Tax (CGT) applies to the profit made when you sell or dispose of an asset that has increased in value, including cryptocurrencies.

It all depends on the scale, but if you’re working a regular job alongside crypto investing, chances are you’ll be classified as a private investor. Hobby miners must pay Income Tax on their mined coins as well as Capital Gains Tax when they sell them. Meanwhile, mining income for commercial miners will be added to trading profits and subject to Income Tax. When you receive an airdrop, you will not only pay Income Tax, but you will also pay Capital Gains Tax if you later sell, swap, spend, or gift the coins or tokens you received. HMRC considers airdrop income to be earned whenever you do something to earn it.

Income tax (applies when you earn a crypto asset)

Passive investors are often within the scope of capital gains tax (CGT). No, you do not have to pay tax if you lose money on cryptocurrency. However, you can claim a capital loss on your tax return, which can offset any future capital gains you make. HMRC defines “exchanging crypto assets for a different type of crypto asset” as a disposal. A crypto-to-crypto transaction (trading) is therefore considered a taxable event similar to selling cryptocurrency for fiat currency.

To report your crypto transactions and pay your capital gains tax, you can use the HMRC’s Government Gateway online service. Here, you’ll be able to fill out a Self Assessment Tax Return and a Capital Gains Tax Summary. At the Crypto Taxes in the United Kingdom time of disposal, calculate the FMV of the token and subtract it from the cost basis to determine the capital gain or loss on the transaction. You can offset a loss with your other capital gains if you have incurred a loss.

• HMRC has given guidance detailing circumstances when submitting collateral can be considered a taxable disposal, which may occur when your collateral gets moved to another platform.
• The content provided on this website is intended solely for general informational purposes and should not be interpreted as professional advice.
• In most cases, HMRC says you’ll have to pay Income Tax on airdrops.
• The Bed and Breakfast Rule applies when an investor sells and then repurchases the same cryptocurrency within a 30-day period.
• If you hold onto your crypto for more than a year, you might be eligible for a capital gains discount.
• HMRC has specific rules for crypto cost basis methods known as share pooling.

Coinpanda’s tax product can create a capital gains report with all of this information for you. Coinpanda will automatically display a warning if it appears that one or more transactions are missing such that the cost basis calculations will not include the total purchase price. If you see any warnings, you should first double-check that you have in fact connected all your wallets and exchange accounts. Today, some employers are paying salaries in cryptocurrency instead of fiat such as GBP to their employees. HMRC states that crypto received as employment income counts as money’s worth. This means you need to pay Income Tax in addition to National Insurance contributions on the fair market value of the crypto received.