Do you owe tax on cryptocurrency in the UK?

If you have, or have previously had any dealings with cryptoassets the chances are there will be a tax liability for you. There’s been some confusion in the past around the tax treatment of crypto, but HMRCs stance is now clear. Read on to find out how tax on crypto works and how we can help you navigate your tax situation.

HMRC’s Evolving Position on Crypto Taxation

Back in 2014, HMRC’s tax guidance for ‘cryptoassets’ suggested that highly speculative transactions might not be taxable, drawing comparisons to gambling. This led to a widespread belief that gains from crypto trading were not subject to taxation. However, as cryptoassets gained in popularity and became more mainstream, HMRC has clarified its stance.

Contrary to the initial interpretation, HMRC now explicitly states that the buying and selling of cryptoassets is not comparable to gambling. Consequently, gains are taxable and likely subject to capital gains tax.

Do You Have to Pay Taxes on Crypto?

The short answer is yes. Despite financial institutions not recognising cryptoassets as money or currency, HMRC treats them similarly to shares, which means they will be subject to Capital Gains Tax and/or Income Tax, depending on the type of transaction.

How Much Tax Do You Pay on Crypto in the UK?

The type of tax you’ll pay depends on the specific transactions you make with your crypto. For capital gains exceeding the £6,000 tax-free allowance, you’ll pay 10% or 20% tax. Additional income from crypto, surpassing the personal allowance, incurs tax rates between 20% to 45%, determined by your Income Tax band. Notably, for the 2024-2025 financial year, the tax-free allowance for capital gains has been reduced to £3,000. And remember, you should always report your losses as these can be utilised against future gains.

Can HMRC track crypto?

HMRC has the capability to track cryptoasset transactions effectively. Using information from exchanges like crypto.com, the tax authority can monitor crypto activities and target investors not fulfilling their tax obligations. Through a data-sharing program with UK exchanges, HMRC has access to transaction data dating back to 2014 and ‘Know Your Customer’ information provided during exchange or wallet sign-ups. HMRC have started sending out ‘nudge’ letters to prompt individuals and businesses to report their crypto activity.

How can SG Accounting help?

If you have crypto investments, have used crypto currency or have done in the past, you will need to complete a tax return and declare your assets. Here at SG Accounting, our specialist tax team can advise and complete your crypto tax return for you, so just get in touch with your Client Director and we can help.