UK Cryptocurrency Tax Guide 2022 Crypto com Help Center

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Crypto Taxes in the United Kingdom

Whether you’re a seasoned trader or a casual investor, understanding these rates and allowances can help you navigate the complex world of crypto taxation. When the transaction fee is in crypto, it should be valued at FMV and would generally result in a capital gain/loss separately as it would be deemed a disposition of capital property. Therefore, in taxable events, your transaction may result in 2 separate reportable capital gains/losses, each of which should be separately listed in your transaction records. Typically in a non-taxable event (e.g. buying crypto), the FMV of the fee will be added to the cost basis of the resulting coins.

Crypto Taxes in the United Kingdom

In these cases, you must retain your records for at least 15 months after the submission of your tax return. For tax returns submitted on or before the due date, you must retain your records for a minimum of 22 months following the end of the tax year for which the tax return was filed. Employers are required to report this through the Pay As You Earn (PAYE) system, and they are responsible for deducting the necessary taxes before the cryptocurrency is handed over to the employee. When you eventually sell the tokens you received as liquidity mining rewards, you might also incur Capital Gains Tax on any profit you make compared to their value when you received them.

What is the deadline for reporting my crypto taxes in the UK?

For example, you can potentially reduce your tax burden if you sell your crypto in a year when you are studying in university full-time. The easiest way to avoid crypto taxes is to simply hold your cryptocurrency for the long-term. You pay Capital Gains Tax when your gains from selling certain assets go over the tax-free allowance. It’s essential to understand that evading taxes is illegal and can lead to severe penalties.

Crypto Taxes in the United Kingdom

In summary, HMRC’s recent guidance suggests that lending or staking cryptoassets in DeFi transactions generally constitutes a disposal for tax purposes. The tax treatment of returns from these activities is contingent on the specifics of each transaction and whether the returns are considered capital or revenue. When you sell cryptocurrency, you’ll incur a capital gain or loss depending on how the price of your crypto changed since you originally received it.

Cryptocurrency as Self-Employment Income

It’s likely that this would be considered a taxable event since the tokens were given in exchange for using a service. According to the HMRC, cryptocurrency received from airdrops may be considered income if it’s given in exchange for a product or service. If you are mining as a Hobby, your income has to be declared separately under the heading of “Miscellaneous Income” on your tax return.

Crypto Taxes in the United Kingdom

According to HMRC, the mere occurrence of a hard fork does not, in itself, constitute a disposal of the original cryptocurrency. This means that when a hard fork occurs, and you receive new cryptocurrency as a result, it doesn’t count as if you’ve sold or gotten rid of the original cryptocurrency. If you later decide to sell or exchange the cryptocurrency you mined, and Crypto Taxes in the United Kingdom its value has increased, you may also need to pay Capital Gains Tax on the profit you made from the increase in value. Transfers between spouses or civil partners are not usually subject to Capital Gains Tax at the time of the gift. Instead, the recipient takes on the original cost basis and will be liable for any Capital Gains Tax if they later dispose of the crypto.