How to calculate your UK crypto tax Crypto Tax Calculator Help Center

Whether or not your airdrop rewards are considered income, disposing of your airdropped cryptocurrency is considered a taxable event subject to capital gains tax. The HMRC has requested and obtained customer data cryptocurrency regulations uk from major exchanges and sent ‘nudge’ letters to crypto investors to encourage them to pay capital gains and income tax. A Capital Gains Tax bill applies when you sell your crypto assets for more than you paid for them.

Categorisation of Cryptos By HMRC (for Taxes)

• This will ultimately be a question of fact and will depend on the specific circumstances of each case.
• An individual will be subject to income tax on the profits made when disposing of cryptoassets, if they are classed as ‘trading’.
• Every cryptocurrency has a set of characteristics that are related to its blockchain network, issuance methods, and technical standards.
• In the UK, the tax implications surrounding wrapped crypto transactions remain somewhat unclear.
• Some countries still express stronger opinions about regulating these digital assets.
• (This is extremely rare and we recommend seeking the advice of a professional before filing).

HMRC clarify which exchange fees can and cannot be deducted from gains as an allowable incidental cost at of the Cryptoasset Manual. You can include allowable costs (also known as incidental costs) when calculating the capital gain or loss for each disposal. Gifts or transfers to a spouse or civil partner are generally treated as no gain, no loss transactions, meaning no CGT is due, though they may still need to be reported on your tax return. However, crypto is only taxable if it has been held for less than one year or is transferred in return for a fiat currency or another payment method, excluding other types of crypto tokens. Just as regulations and crypto tax treatment vary globally, EU countries do not yet have a standardised system. Below we compare the tax rules in Spain, Malta and Portugal as an overview – but it https://www.xcritical.com/ is important to highlight that other European countries may have different taxation bases.

How do I calculate capital gains tax on my crypto investments in the UK?

It’s important to note, that so far, it Stablecoin appears Coinbase is the only exchange to have been required to supply this information to HMRC on behalf of their customers. If you have transacted in Crypto assets outside of Coinbase they may not have been reported to HMRC. I.e, if you have bought Bitcoin directly Via your Binance account this doesn’t appear to have been reported to HMRC.

Simplify Your Crypto Taxes with GoForma

Interestingly, HMRC take the view that exchange tokens are not typically consideration for stamp duty purposes, save where they are treated as debt. By way of contrast, exchange tokens are treated as consideration for stamp duty reserve tax purposes. This has led to difficulties that where shares are sold intra-group, for example for Bitcoin, stamp duty group relief should not be available and so it is not possible to “frank” the stamp duty reserve tax charge.

If you buy and sell a cryptocurrency the same day, then the sale is considered made from the coins you bought on that same day. Lending collateral to a DeFi protocol typically is not a taxable event. HMRC has given guidance detailing circumstances when submitting collateral can be considered a taxable disposal, which may occur when your collateral gets moved to another platform. When a user locks up their existing cryptocurrency as collateral, they can receive tokens in return. For example, you could put ETH as collateral and in exchange, receive DAI.

To calculate her cost basis on a per ETH basis, we need to average out her total costs. To better understand how airdrops are taxed, consider the 2021 $ENS airdrop. In this case, anyone who previously used the Ethereum Naming Service was entitled to claim $ENS tokens. It’s likely that this would be considered a taxable event since the tokens were given in exchange for using a 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. Of course, it’s also important to remember that your cryptocurrency income from mining is classified differently whether you are mining as a hobby or as a business.

It’s crucial to note that you should maintain a record of the cryptocurrency you have donated, along with details such as the date and FMV of the token at the time of the donation. This record-keeping is essential because you might be required to furnish this information to HMRC for taxation purposes. In the UK, how you’re taxed for crypto mining depends on whether it’s a hobby or a business. There are several factors through which you can determine whether you are doing it as a hobby or mining crypto as a business. Personal tax is the tax you pay on your income from various sources, such as employment, self-employment, property, savings, dividends, or crypto. As per HMRC, certain crypto transactions are subjected to personal tax implications.

This means if you get an airdrop without having to perform any service or task, it’s not subject to immediate taxation. Anna owns 10,000 ADA (a cryptocurrency), which she originally bought for £10,000. To realize a tax loss without significantly changing her portfolio, Anna decides to sell and then rebuy a portion of her ADA. The Taxation of Chargeable Gains Act 1992 (TCGA92/S52(4)) suggests a fair method is to split the fee 50/50 between the sold and acquired assets.

Though these rules apply to traditional markets, crypto CFDs might follow a similar approach. However, to avoid any confusion, it’s wise to consult a UK tax advisor for tailored advice on how your crypto CFD trading might be taxed. In most cases, profits from CFD trades are subject to Capital Gains Tax when the position closes. This means you only need to pay tax on the difference between your opening and closing positions. If your position is liquidated, HMRC views this as a “disposal,” and any gains will also attract CGT.

These tools can automate much of the process, tracking your transactions across multiple exchanges, calculating your gains and losses, and producing tax reports that are ready to submit to HMRC. The FMV of your cryptocurrency is considered as income if you received it from mining, staking, airdrops, or as payment for goods and services. By deducting this cost basis from the value of your crypto at the point of disposal (i.e., when you sell, trade, or gift it), you can determine your actual gain, which is the amount subject to tax. Timely filing of your crypto taxes with HM Revenue and Customs (HMRC) in the UK is a legal obligation that comes with owning or trading cryptocurrencies. You must report your crypto tax by the 31st of January following the tax year during which the disposal occurred. It’s crucial to remember that pay tax is applied to the profit you make, not the total sale value.

This will ultimately be a question of fact and will depend on the specific circumstances of each case. In practice, it is very unlikely that HMRC will accept that an individual is trading in cryptoassets. In 2021, Bobby purchased an NFT for £10,000 and then held the NFT for 6 months before selling it for £50,000.

Therefore, she has to pay £1,920 (£4,800 x 40%) in income tax on her staking rewards. As per HMRC, if considered a business, your crypto mining activities will attract income tax on your mining profits. This means that you will pay income tax on the fair market value (FMV) of the cryptocurrencies you mine when you receive them. It is possible to opt for taxation at the progressive rate and a limited possibility for losses to be offset against other income from capital.

However, it’s important to remember that there are some restrictions on claiming capital losses. The Same Day Rule and the Bed & Breakfast Rule are designed to prevent investors from claiming losses solely for tax purposes. To calculate your cost basis for a given cryptocurrency, you can use the shared pooled accounting method (more on this in the next section). Remember, HRMC has stated that there is no need to complete a Self Assessment tax return for your mining activity if you’ve received less than £1,000 in crypto-assets. If you have a net loss for the year,  your losses can be carried forward to offset capital gains in future tax years. It can be valuable to keep this number in mind when taking profits on cryptocurrency.