Cryptoasset Taxation

Millions of investors across the UK are believed to own some form of cryptoasset.

The boom in NFT and cryptocurrency investments in recent years means that many investors, miners and traders have additional taxable income, which needs to be reported.

If you own, produce or sell cryptoassets, like Bitcoin or Ethereum, then you must understand the tax implications of your online activity.

You could be accruing considerable liabilities due to your income and gains from cryptoassets that could result in a significant tax bill or a tax investigation.

How are cryptoassets taxed?

Many different factors go into the taxation of cryptoassets, but how you derive an income from NFTs or cryptocurrencies is most likely to determine how HM Revenue & Customs (HMRC) decides to tax you and the size of your potential bill.

• Investors – Most ‘amateur’ investors will only pay tax on the gains that they make from the sale of their investments each year under the Capital Gains Tax system.
• Miners – Income from mining is treated via the income tax system, rather than the gains you make on the sale of the assets you create.
• Traders – If you trade professionally then your returns are most likely to be taxed via income tax.

If you are involved with the cryptoasset markets, whether as a part-time amateur investor or a long-standing crypto trader, you must not only report your income or gains correctly via self-assessment but also pay the correct amount of tax.

There may be steps to mitigate the amount of tax that you pay depending on allowances and other reliefs available to you, so it is best to seek advice beforehand.

Staying compliant

HMRC has become increasingly interested in the activities and income of cryptoasset investors, miners and traders in recent years.

It has been conducting several campaigns, including sending thousands of ‘nudge letters’ to those involved in the cryptoasset industry, to ensure they are reporting their income and gains correctly.

Many of the crypto trading platforms are based overseas and so a failure to disclose information may leave some UK taxpayers exposed to the punitive penalty regime associated with offshore evasion, which can result in penalties of up to 200 per cent of the under declared tax.

We can help you to calculate the tax owed and complete your tax return accurately, including making disclosures on previous income.

We will help you remain compliant with the changing tax rules surrounding cryptoassets and provide you with a deeper understanding of how your activities online affect your tax position.

Do you need help with the tax implications of your cryptoasset activities?

Arrange a quick, informal chat with our tax team today to find out how they can help you.