Cryptocurrency

We can also assist you with the completion of your Self-Assessment Tax Return along with returns for any Capital Gains Tax or miscellaneous income.

With an increasing number of those both in the UK and worldwide dealing in and trading with cryptocurrency, it is not surprising that HM Revenue & Customs (HMRC) are taking an increasing interest in those who have failed to declare crypto income and gains. It still seems many are unaware that they are reportable and taxable, despite HMRC releasing its first cryptoasset guidance back in 2017. HMRC is using its information-gathering powers to retrieve a list of investors from exchanges, sending such investors ‘nudge letters’ to remind them that taxes may be due and need to be paid. 

If you have failed to declare such income and gains in prior tax years we can advise and assist you in complying with returns, as well as giving guidance in terms of any penalties that may be incurred.

Help with cryptocurrency transactions for tax reporting!

We recognise that for some individuals, especially those with a high number and value of transactions, assessing whether they need to report or include cryptocurrency in their tax return can be a challenge, let alone actually compiling an acceptable crypto tax report for the eyes of HMRC. As such, for those without access to any cryptocurrency tax specialist software, we are delighted to have linked up with Recap.

Recap is UK-focused crypto tax software that is designed to make managing your cryptocurrency taxes simple. Even if you're dealing with thousands of transactions across multiple wallets, blockchains and exchanges, Recap has you covered. The platform not only prioritises privacy but also enables you to share your account with your Streets Tax Adviser, facilitating seamless collaboration in determining your overall tax liability.

Check for free if you need to file a return

Recap is completely free to get started. Simply connect your crypto exchange accounts like Coinbase, Kraken and Binance and discover if you need to file a return for free.

If you need to file, Recap has two price plans to generate tax reports. £99 including VAT for accounts with less than 5000 transactions and £179 including VAT for accounts that exceed 5000 transactions.

To receive a link for your free trial please email cryptotax@streets.uk 

Is cryptocurrency taxable in the UK and if so, how is crypto taxed?

Whilst there is no specific cryptocurrency tax in the UK, crypto transactions that incur a capital gain and/or income are subject to taxation, including Capital Gains Tax, Income Tax and sometimes National Insurance (NIC).

Income Tax and cryptocurrency

Individuals who operate as self-employed and have crypto income exceeding the annual trading allowance of £1,000 are required to declare this through a Self-Assessment Tax Return by 31st January each year. Income Tax is payable where income exceeds £12,570 per year, however the NIC threshold is lower. Therefore, if you are trading in crypto and you are not reporting such income then you will need to include it in your Tax Return.

You may be liable for Income Tax if you are:

• Getting paid by your employer in crypto
• Mining crypto
• Staking crypto
• Receiving airdrops

Capital Gains Tax and cryptocurrency

If you have made more than £6,000 in profit from selling, swapping, gifting to another person other than your spouse or civil partner, or spending (using it to buy goods and services) crypto then such a gain will be subject to Capital Gains Tax. The annual exemption for Capital Gains Tax reduces to £3,000 from 6 April 2024.

Cryptocurrency and businesses

Businesses involved in cryptocurrency trading or mining may be subject to corporation tax on their profits.

The supply of cryptocurrency is generally exempt from VAT in the UK. However, some activities related to cryptocurrencies, for example NFTs, may by subject to VAT.

In some exceptional cases it might be that individuals are considered to be financially trading in cryptoassets. Typically, this may occur in the following circumstances.

• Mining activities
• Airdrops
• Yield Farming

What are the tax implications of losses on cryptocurrency transactions?

If you realise a loss on any of your chargeable assets, including crypto, you may be able to reduce your total taxable gains.

You can claim losses at any time within four years from the end of the tax year in which the loss was made.

How do you determine tax due on cryptocurrency?

For income tax you will need to calculate the income you have received in crypto or generated from your cryptocurrency transactions.

To determine how much Capital Gains Tax is due on your cryptocurrency transactions you’ll need to calculate the gain on each individual disposal.

Your gain is normally the difference between what you paid for an asset and what you sold or traded it for. If the asset was free, you’ll need to use the market value when working out your gain. You do not need to pay Capital Gains Tax on the value of the tokens for which you’ve already paid Income Tax.

You can deduct certain allowable costs, including a proportion of the pooled cost of your tokens, when working out your gain.

You can also use capital losses to reduce your gain, but you’ll need to report them to HMRC first.

If your total taxable gain is above the annual tax-free allowance, you must report and pay Capital Gains Tax.

Are there any crypto tax calculators?

Whilst some individuals with more simple transaction histories may be able to keep details of their crypto trading and transactions details on spreadsheets or other forms, it is easier and provides more assurance and validity if a suitable crypto tax calculator or crypto tax software programme is used. Examples include Recap, Koinly, TokenTax, and CoinTracker. Specialist crypto software can scrape data from exchanges and wallets to help work out your tax liablity. Some tools also include a free crypto tax calculator for the UK to help you work out your profits and liabilities.

For those that make significant or large numbers of crypto transactions, calculating the gains and losses made along with the income received can be a real challenge. When it comes to completing both your Self-Assessment Tax Return and Capital Gains Return it is easier for your tax adviser, such as Streets, if you can provide a statement of income and gains ideally through the use of specialist cryptocurrency tax software or cryptocurrency tax calculators.

What records do you need to keep for cryptocurrency for tax purposes?

You must keep separate records for each transaction, including:

• type of tokens
• date you disposed of them
• number of tokens you’ve disposed of
• number of tokens you have left
• value of the tokens in pound sterling
• bank statements and wallet addresses
• a record of the pooled costs before and after you disposed of them

HMRC might ask to see your records if they carry out a compliance check.