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Cryptocurrency tax laws in the UK


Does the UK tax cryptocurrency? Curious about the UK crypto tax and HMRC's stance on Bitcoin and other cryptocurrencies? Our complete UK crypto tax guide for 2023 covers all you need to know about crypto tax.


Do You Pay Taxes On Cryptocurrency?


Sadly, for most crypto investors, the answer is yes. However, exceptions exist.


Financial institutions don't consider crypto assets money. Crypto assets are taxed like shares.


Crypto traders and investors must know all transactions, from buy and sell orders to airdrops, staking, hard forks, etc.


The crypto sector is growing quickly, making taxation more problematic. Unique and complicated cryptocurrencies like gambling and gaming platforms, hybrid tokens, and non-fungible tokens have transformed the asset class.


Tax regulations are more beneficial if you are not a UK tax resident or domiciled in the UK.


What Is Your Crypto Tax Rate?


Income Tax


Trading bitcoin incurs income tax.


Day traders acquire and sell crypto assets to make short-term profits.


If trading on their own account, individuals are unlikely to be eligible as "traders" for income tax reasons and will likely be subject to capital gains tax.


You must acquire and sell crypto assets with the aim, sophistication, frequency, and organisation of a financial deal to qualify as "trading."


If you reach the trading level, net earnings will be liable to 20%, 40%, or 45% income tax, and 12% or 2% national insurance.


Crypto earnings are taxable: In England, Wales, and Northern Ireland, your tax band ranges from 0% to 45%. In Scotland, which has two extra bands, a 19% starting rate, and a 21% intermediate rate,


Capital Gains Tax


Capital gains tax applies to most people who acquire, hold, and sell bitcoin.


The value of crypto asset disposal profits will be matched against acquisitions in a certain sequence, making it a taxable event:

  • Same-day crypto assets

  • Crypto assets bought within 30 days

  • The pool's average price.

Above £12,300, capital gains are taxed. If your profits exceed this threshold, you'll pay 10% tax up to the basic rate tax band (if applicable) and 20% tax on earnings at the higher and extra tax rates.


Avoiding Crypto Taxes


In some instances, crypto is tax-free.


Airdrops


Airdropped crypto isn't taxable if it's not used in a crypto transaction or company.


They're received for free.


Airdrops received in exchange for a service will be taxed as miscellaneous income or trade gains (if you are a business).


Any value that rises from an airdrop will be added to trading gains and taxed. However, capital gains tax will apply to airdrops.


The UK doesn't tax these crypto transactions either:

  • 'HODL'ing crypto — holding your crypto for as long as possible

  • Sending crypto between wallets

  • Using GBP to buy crypto

  • Spouse crypto gifting

Do you want to contact a professional regarding your crypto tax issues or for more information? Book a call right now and get industry-leading help from the best professionals.


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