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Are you looking for tax advice on cryptocurrency?

Tax Advice on Cryptocurrency and Cryptoassets

Mike Wakeford

Are you looking for tax advice on cryptocurrency?

There are a number of myths centred around the taxation of crypto assets in the UK, one of these myths is that crypto assets are viewed as a ‘winning’ similar to gambling or playing the lottery and so therefore they fall outside the scope of UK taxation, but this is not the case. HMRC does not generally consider the buying and selling of cryptoassets to be gambling.

Investing and trading in cryptocurrency can potentially involve large sums of money and this has raised the profile of cryptocurrency investment with HMRC, who are there to ensure that all individuals and businesses trading and investing in cryptocurrency are paying the correct amount of UK tax on their cryptocurrency assets. Despite the name “cryptocurrency” HMRC does not consider cryptoassets to be currency or money. Therefore it is important to speak to a tax adviser to be aware of the UK tax obligations in relation to the trading and investing of cryptocurrency, to ensure that you pay the right amount of tax. 

How will HMRC know what gains have been made by investing and trading cryptocurrency?

Many investors in cryptocurrency think that HMRC are likely to never find out about gains made and so therefore they choose not to disclose them, but it is worth noting that HMRC are able to see any gains made from cryptocurrency by:
  • Gains that are made with cryptocurrency will need to be extracted at some point and any bank that receives unusual payments from a cryptocurrency platform may be required to report these payments to HMRC
  • Under the Unexplained Wealth Orders (UWOs) HMRC now have the power to ask individuals to explain the source of their wealth. Wealth which is generated by cryptocurrencies can be hard to extract and spend without HMRC suspicion. 
  • HMRC have significant powers to acquire information should they need it from a range of sources. This includes HMRC receiving information directly from all UK crypto exchanges and platforms.
How will my crypto assets be taxed?

Any gains made on cryptoassets are subject to Capital Gains Tax (CGT), meaning that you pay tax on the difference between what the cryptocurrency cost you and how much you sold it for. You will only have to pay capital gains tax on your overall gains above your tax-free allowance, this is known as your annual exempt amount. Currently, for this year the capital gains tax free allowance for a UK taxpayer in 2021/22 is £12,300. ​

Will my business have to pay tax on cryptocurrency?

Similar to capital gains tax for individuals, businesses will have to pay tax on activities that include:
  • Buying and selling exchange tokens
  • Providing goods or services in return for exchange tokens 
  • Using tokens as an exchange for other assets, this includes cryptoassets 

If your business is in the trading of cryptocurrencies then any profits will be subject to income tax at normal rates. If a business accepts cryptoassets as payment then the transaction must be converted at an appropriate currency value at the time of the transaction (with any subsequent movement on the cryptoasset being dealt with as a capital gain/loss).

Looking for more tax advice on cryptocurrency/ Cryptoassets?

At Moore, we are here to help you prepare for any tax liabilities that you may incur as a result of investing in, or trading cryptocurrency. With cryptocurrency, it is important to financially plan for any potential losses. If you are looking for expert tax advice in cryptocurrency please contact your local Moore office.