Many crypto investors in the UK will file a tax return for the first time for the tax year 2022/23. Whether you are a seasoned crypto enthusiast or a beginner, it’s crucial to understand your tax obligations. In this guide, we will simplify the complexities of crypto tax in the UK and help you navigate the process.

When should I declare crypto activity?
HMRC make it clear that all crypto activity is taxable and not tax-free gambling. Most commonly it is treated as investment activity. Investors pay income tax or capital gains tax on yield/rewards generated from crypto, depending on the circumstances. Capital gains tax is paid on capital gains arising on taxable disposals. Business activity is rare and is not covered here.

Taxable Disposals of Crypto:

  • Selling crypto for fiat currencies (eg GBP, USD, EUR).
  • Swapping one crypto asset for another.
  • Making a gift of crypto (note: there’s no tax if it’s a gift to your spouse or a qualifying charity).
  • Using crypto to pay for goods and services (including transaction fees).
  • Engaging in DeFi activities like staking, lending, liquidity pools, or providing collateral for loans.

Filing a Tax Return:
If your circumstances necessitate a tax return, you must register with HMRC and file a tax return for the tax year ending on 5 April 2023 if:
Your net capital gains, before capital losses (from all assets including crypto) exceed
Your total investment income from all sources (crypto, dividends, interest, etc.) exceeds £10,000.
If are required to file tax returns for another reason (ie rental properties), you need to declare capital gains and losses from crypto on the return if your disposal proceeds exceed £49,200; even when the capital gains are less than £12,300.

If your investment income falls between £1,000 and £10,000, you must notify HMRC via a phone call. Failure to register by 5 October 2023 may result in late registration penalties, but these are often waived if you file your 2022/23 tax return and pay the tax by 31 January 2024.

Don’t forget to claim your crypto losses! Even if you don’t have to file a tax return, you should still claim your capital losses by sending a letter to HMRC, as they are carried forward for future use.

Act now!
With the 31 January 2024 deadline for filing the 2023/24 tax return rapidly approaching and the number of UK crypto users increasing, we recommend that you take action on your crypto tax position now. Utilise crypto tax software, with our trusted partner as a recommended option. This software is crucial for accurately calculating your tax obligations.

It factors in the sterling value at the time of the transaction and considers the pooling and matching rules when determining your acquisition cost. Entering your crypto data into the software can be time-consuming, so don’t delay.

If you need help with your crypto tax position, please contact crypto tax expert Louise Lane here >>>