What is the Crypto Tax Rate in The UK?

Cryptocurrencies remove the need for centralised intermediaries and allow users to transact directly with each other, but that doesn’t mean they come without tax implications.

 

In the UK, it is important to understand how cryptocurrencies are taxed in order to remain compliant with HMRC regulations. Let’s review what the crypto tax rate is in the UK and what it means for you.

UK Crypto Tax Rates

The UK considers cryptocurrencies to be assets rather than currencies. This means that any profits made from trading cryptocurrencies will be subject to Capital Gains Tax, with the amount of tax owed depending on the total capital appreciation.

 

Cryptocurrency earned from mining, staking, or providing services is subject to Income Tax and National Insurance contributions, where the rate of tax applied depends on your income. If a company is conducting cryptocurrency activities, then Corporation Tax will also apply.

 

If you are holding cryptocurrencies in a digital wallet, then you will not be liable for any tax as no taxable event has taken place (i.e you have not traded the asset during that tax year).

 

Key Takeaways

 

• Capital Gains Tax (10-20%) is due for any profits made by selling, spending, or swapping cryptocurrencies.
• You’re entitled to a Capital Gains Tax allowance, which is the amount of profit you can earn before having to pay taxes.
• Income Tax must be paid on all income earned from mining, staking, or receiving cryptocurrency as payment for services.
• The HMRC Self Assessment Tax Return must be filed before January 31 of each year.
• Use Cryptiony to get up-to-date insights into your tax liabilities.

 

Let’s delve deeper into how your specific Capital Gains Tax rate is determined in the UK.

 

Capital Gains Tax Rate for Cryptocurrency in the UK

The UK Capital Gains Tax rate is determined by the total amount of annual income and the banding system used by Her Majesty’s Revenue and Customs (HMRC).

 

• 10% – Basic Rate (below £50,270)
• 20% – Higher Rate (above £150,000)

 

For example, if you have an annual salary of £20,000, make £15,000 from trading crypto, and have no other sources of income, then your total taxable income would be £35,000 and you would fall into the basic rate.

 

However, the Capital Gains Tax Allowance of £12,300 must also be included in the calculation (more on this below) — so the £15,000 capital gains amount is reduced by £12,300, leaving you with a taxable amount of £2,700. The 10% capital gains tax rate would then be applied to this amount to give you the final figure of £270.

Capital Gains Tax Allowance for Cryptocurrency in the UK

As we previously mentioned, each year you are entitled to a Capital Gains Tax Allowance, which is the amount of profit you can earn without having to pay taxes.

 

For the 2022/2023 tax year, the tax allowance is £12,300. This means that any profits made from cryptocurrency trading up to £12,300 are exempt from Capital Gains Tax.

 

However, this allowance does not apply to additional income from mining, staking, or receiving payments for services rendered with cryptocurrency. In these cases, you must pay Income Tax.

 

It’s worth noting that this Capital Gains Tax Allowance changes regularly, with plans to lower the allowance to £6,000 in April 2023 and £3,000 in April 2024. This is important to consider when planning your cryptocurrency investment strategy.

UK Income Tax Bands

Additional income from mining, staking, or receiving cryptocurrency as payment for services rendered is considered to be income and must be reported on your tax return. This means that it is subject to the UK’s income tax bands.

 

Your payable rate will depend on your total annual income, as well as any other sources of taxable income you may have.

Income tax bands for taxpayers living in England and Wales:

• 0% – Personal Allowance (income below £12,571)
• 20% – Basic Rate (income between £12,571 and £50,270)
• 40% – Higher Rate (income between £50,271 and £150,000)
• 45% – Additional Rate (income above £150,000)

 

This doesn’t mean that those earning £80,000 will pay a 40% tax rate on all £80,000. It simply means that all earnings between £50,271 and £150,000 — £29,729 in this case — will be taxed at the 40% tax rate.

Income tax bands for taxpayers living in Scotland:

• 0% – Personal Allowance (income below £12,571)
• 19% – Starter Rate (income between £12,571 and £14,732)
• 20% – Basic Rate (income between £14,733 and £25,688)
• 21% – Intermediate Rate (income between £25,689 and £43,662)
• 41% – Higher Rate (income between £43,663 and £150,000)
• 46% – Top Rate (income above £150,000)

 

As you can see, when it comes to UK crypto tax rates, there are some major differences between the two countries. Be sure to research the specific requirements for your area before preparing your tax return.

When to File UK Crypto Taxes?

The tax year runs from April 6 to April 5 of the following year. You must file your HMRC Self Assessment Tax Return before January 31 of each year, showing all taxable income capital gains from the previous tax year.

 

It’s crucial to remember that HMRC could audit your accounts at any moment, so always keep your records organized and up-to-date, as well as make sure you satisfy UK tax requirements.

 

How to File UK Crypto Taxes with Cryptiony

While we have gone through the basics of crypto taxes in the UK, it’s important to remember that this is a complex and ever-changing area, which means staying financially compliant is no easy task.

 

Cryptiony is an online crypto tax platform that makes filing UK cryptocurrency taxes easy and stress-free. Our proprietary software automates the entire process, allowing you to generate accurate reports with just a few clicks of your mouse.

 

No more flicking through pages of spreadsheets, wasting hours on online research, or risking if your calculation is correct — simply connect to your exchange or manually input the data, and then let Cryptiony instantly calculate your tax liability.

 

So don’t get caught out by the UK’s crypto tax system. Sign up for a free trial now and see how easy it is to stay compliant with HMRC’s regulations and maximize your profits when trading crypto.