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UK Cryptocurrency Tax Guide in 2022

Last updated 30th Nov 2022
Disclosure

There are many people who decide to buy cryptocurrency in the UK and they must know the United Kingdom has straightforward guidelines for taxing cryptocurrencies.

However, if you’re a beginner in this market, it can initially seem confusing. Therefore, we’ve created this comprehensive guide to help inform our readers. We’ll cover how to pay crypto taxes in the UK, allowances you can take advantage of, and how you can reduce crypto taxes.

Do You Have to Pay Taxes on Cryptocurrencies in the UK?

Yes, the UK requires its residents to pay taxes on cryptocurrencies. The HMRC (HM Revenue and Customs) is the UK’s government body responsible for collecting taxes and will track individuals' assets in certain circumstances to verify the correct amount has been paid. HMRC states that the investor can be subject to capital gain tax and income tax depending on the crypto transaction.

How Is Crypto Taxed in the UK?

Based on your investment activity, you will have to pay capital gains or income tax. Here’s what triggers a taxable event in both categories.

Capital Gain Tax

  • Selling cryptocurrency

  • Trading cryptocurrency for another cryptocurrency

  • Using crypto to make purchases

Income Tax

  • Mining

  • Staking

  • Referral rewards

  • Airdrop rewards

How Much Does the UK Tax Cryptocurrencies?

As mentioned before, cryptocurrencies are taxed under capital gains or income. Both use a bracket system where individuals with higher profits will pay more. Here are the percentages you’ll pay:

Capital Gain Tax

IncomeTax PercentageUp to £50,27010%£50,721 - £150,00020%More than £150,00020%

Income Tax

IncomeTax PercentageUp to £12,5700%£12,571 - £50,27020%£50,721 - £150,00040%More than £150,00045%

What crypto transactions are not taxable?

Some cryptocurrency transactions or investment activities are not taxable in the UK. Some of these include:

  • Holding crypto long-term

  • Sending crypto between wallets and exchanges

  • Gifting cryptocurrency to a partner

  • Donating cryptocurrency

  • Buying cryptocurrency using GBP

Crypto Tax Allowances in the UK

UK investors can pay 0% tax on profits up to £12,300 by using the capital gain tax allowance scheme. Also, you will not have to pay taxes if you receive crypto assets worth less than £1,000. If you would like to learn more, take a look at our guide on how to invest in cryptocurrency in the UK.

Crypto Capital Losses Explained

Cryptocurrencies are volatile assets, so it’s not uncommon for investors to lose money. If you lose money on crypto, you won’t have to pay capital gain tax. However, you should still keep a detailed record and register them with HMRC because you can offset losses with capital gains.

The United Kingdom has no limit on how much capital gain losses can offset your gains. This means you can effectively pay no tax until you reach the free tax allowance of £12,570 as long as your losses offset gains.

Are Stolen Cryptocurrencies Considered Capital Losses?

HMRC does not consider lost or stolen crypto as capital gain losses. However, you can make a negligible value claim if you can prove you cannot access your lost or stolen crypto. If the claim is successful, you can take the lost funds as capital gain losses.

Can HMRC Track Crypto Assets?

Yes, HMRC can track cryptocurrency assets by working with exchanges and using customer information provided through the KYC process. In fact, HMRC has been tracking crypto transactions since 2014 and has a data-sharing program with all licensed exchanges in the UK.

How Can I Avoid Paying Taxes on Crypto in the UK?

There is no way you can avoid paying taxes on cryptocurrencies in the UK. However, you can reduce your tax rates legally, here’s how:

Tax Breaks

UK residents only have to pay capital gain tax on profits exceeding £12,300. Also, if you are going to pay income tax, you can use the standard personal allowance to pay 0% tax up to £12,570.

Gift Crypto to Your Partner

You can gift your significant other crypto and benefit from the capital gain tax allowance. This effectively doubles the amount you won't have to pay on crypto taxes to £24,600. However, HMRC will not allow you to use this benefit if you and your partner are not living together or separated.

Donation

Cryptocurrency donations are tax deductible in the UK. Therefore, you can allocate some of your portfolio to charity and gain a deduction worth the full value.

How to Pay Cryptocurrency Taxes in the UK

This section will highlight the process of paying taxes in the United Kingdom.

How to Calculate Crypto Taxes

The best way to calculate crypto taxes is to use a service that tracks your investments. However, if you want to manually calculate your taxes, here’s how:

  • Track all the taxable transactions you’ve made

  • Identify if they are subject to capital gain or income tax

  • Calculate your profits and losses

  • Subtract losses from profits

Where to Declare Crypto Taxes in the UK

Once you’ve calculated your taxes the next step is to declare it to HMRC. Visit the Government Gateway to file your taxes under the Self Assessment Tax Return. You’ll need to declare crypto gains and losses on SA100 and Capital Gains Summary SA108. However, if you need to report crypto income, it’s box 17 of the Self Assessment Tax Return.

How to Pay Cryptocurrency Tax in the UK

After you’ve filled out your taxes, HMRC will get back to you with the exact amount you owe. They will also display their banking details where you can pay your crypto tax.

Summary

To conclude, the UK is straightforward with how they tax cryptocurrencies - income or capital gain tax. Based on profits you’re placed in a bracket where you’ll pay a fixed percentage amount. However, you can reduce your taxes by donating, offsetting previous losses, gifting crypto to a partner, and using tax breaks.

FAQs

How Is Cryptocurrency Taxed in the UK?
What Are the Tax Allowances Like for Crypto in the UK?
When Is the UK Tax Deadline for Declaring Crypto Gains?
When Can I Not Pay Taxes on Crypto Gains?
Will I Be Taxed for Staking or Mining?

Dominikas Pupkevicius