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Crypto tax UK: What you need to know

Cryptocurrencies – particularly Bitcoin – have made it mainstream in recent years, making them almost impossible to ignore. Yet, a veil of mystery surrounds the subject, especially when it comes to crypto tax.

Thankfully, HMRC was one of the world’s first tax offices to release clear guidance on cryptocurrency tax in the UK – and we’ve rounded up some of the key need-to-knows for 2022.

First thing’s first, is crypto taxable in the UK?

While there is no specific cryptocurrency tax in the UK, crypto is subject to either Capital Gains Tax or Income Tax, depending on your investment. For example, if you’re earning crypto (like an income), you’ll pay Income Tax. If you’re selling, trading, or spending crypto and are seen to be making a capital gain, you’ll pay Capital Gains Tax.

So, do you pay tax on all crypto gains?

No – every UK taxpayer has a Capital Gains Tax-Free Allowance of £12,300. This means that any capital gained over £12,300 is taxed at either 10% or 20%, depending on your regular income.

What about capital losses and taxes?

You won’t pay Capital Gains Tax on capital losses. What’s more, by keeping a record of your capital losses, you can offset these against your capital gains. In some cases, this might reduce your capital gains back down to the Capital Gains Tax-Free Allowance of £12,300, so you won’t have to pay Capital Gains Tax.

How much will you be taxed on crypto income?

Crypto Income Tax rates are the same as Income Tax Bands for your regular income, which changes depending on the year. So, you can start by identifying which Income Tax Band you’re in. Then add any additional income from your crypto and check that you remain in the same Tax Band. If your crypto income pushes you into a higher Tax Band, this is the amount of tax you will pay on your crypto.

Are cryptocurrencies ever UK tax-free?

Yes – you won’t always pay UK tax on your crypto. These instances include donating crypto to charity; gifting crypto to your spouse; buying crypto with GBP; transferring crypto between your wallets; and HODLing crypto (holding investments regardless of price).

Can you get crypto tax advice?

It is recommended that you seek advice before buying crypto, since it’s still unpredictable and often volatile. Better still, consulting with a tax specialist experienced with issues relating to cryptocurrency can offer you peace of mind.

At Turner Little, we provide legitimate guidance on investing wisely and minimising your tax liability. Talk to us if you’d like to understand more about cryptocurrencies or explore other ways to maximise your wealth.

Turner Little and its affiliates do not provide tax, legal or accounting advice. Material on this page has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.