Are you Aware of your Tax Obligations When it Comes to Cryptocurrency?

Are you aware of your tax obligations when it comes to Cryptocurrency?

Did you know that any gains that you make from cryptocurrency and other crypto assets are taxable?

This can include crypto such as exchange tokens (e.g. bitcoin and others), NFTs (non-fungible tokens) and utility tokens. The UK treats crypto assets as property (similar to shares) rather than currency or money, so they’re taxed either as capital gains or under income tax.

In December 2023, HMRC launched a new campaign to encourage people to come forward and voluntarily disclose and settle any unpaid tax on crypto assets. The information that HMRC can obtain on crypto investors and the potential for identifying unpaid tax looks likely to increase in future. Voluntary disclosure of missed tax generally has lower penalties than if HMRC initiates an investigation.

If you sold cryptocurrency or other crypto assets and made a gain, you may owe some capital gains tax. But it’s not just selling your crypto that can result in a tax liability. Other types of crypto transactions can have tax implications you may not be aware of.

There could be capital gains tax due if you exchanged your tokens for a different type of crypto asset, used them to pay for goods or services, gave them away to someone else, or donated them to charity.

There may be income tax due if you earned a profit from activities such as mining, staking, and airdrops or are paid in crypto for providing products, services or as a salary.

Whether you have any tax to pay depends on your particular tax circumstances and the amounts involved. Some of the capital gains may be covered by your annual capital gains tax allowance or the income via your small earnings allowance or personal allowance.

We can help you review your historical and current crypto assets situation in detail and determine whether a voluntary disclosure or tax return could be required. If you do have capital gains, the calculations can be complex and we can also provide support with this.

Please get in touch with Jane Falconer-White in our tax team, who would be happy to provide you with advice specific to your circumstances: jane.falconer-white@mitchellsaccountants.co.uk or 01246 274121 (Option 2 for tax)