Contrary to public opinion, cryptoassets may be subject to tax in the UK. Due to the complex nature, personalised advice is recommended but the brief implications are as follows:
Capital Gains Tax for Cryptoassets
Generally, if a cryptoasset is sold for a profit, this will result in a capital gain. Crypto gains over the annual tax-free amount will be chargeable to capital gains tax at either 10% or 20% depending on your circumstances and need to be reported on a self-assessment tax return.
Even if total gains during the tax year are within the annual exempt amount but the total proceeds (being the amount the assets are sold for) exceed four times the annual exempt amount, these disposals will need to be reported on your tax return.
CAUTION – Most platforms will allow individuals to purchase one cryptoasset with another cryptoasset. Such an exchange will be treated as a disposal of the original asset for capital gains tax purposes. This makes it quite easy to inadvertently breach the limits above.
In instances where the sale price is less than the purchase price, this results in a capital loss. Losses are initially offset against any other capital gains arising in the same tax year. Any unused capital losses are carried forward and offset against chargeable capital gains in future years.
Get in contact with our team to help you manage and report the capital gains tax you pay on cryptoassets.
Income Tax for Cryptoassets
Whilst most crypto transactions will be treated as capital transactions, certain activities may be subject to income tax instead, these can include mining, staking and receiving airdrops.
These are either treated as miscellaneous income or regarded as a trade (self-employment) and are taxable at either 20%, 40% or 45% depending on your other income.
Inheritance Tax (IHT) for Cryptoassets
The value of any cryptoassets would be included in your estate for IHT purposes and potentially subject to 40% IHT. Due to the nature of crypto, your executors may find it difficult to access this information. Some platforms now let you authorise someone to access your account on your death.
Please remember to talk to us about any crypto transactions you have made so that we can consider the tax implications with you.
This article was correct at time of publication.