Cryptocurrency has gained a lot of popularity in the UK. People in the UK want to know more about paying tax on cryptocurrency UK because they want to gain maximum profits from their crypto investments. Cryptocurrencies are digital currencies that don’t connect with banks or central authorities. Transactions made through cryptocurrencies are recorded through distributed ledger technology. This allows cryptocurrency users to prevent the use of units twice. It also enables the users to share data globally. Many people in the UK are interested in selling and buying cryptocurrency. HMRC recognizes them as assets, and the cryptocurrency owners need to pay tax on their profits. The cryptocurrency market is new, and the rules around tax are evolving. This guide will help you find out about all the taxing on cryptocurrency.
Do You Have To Pay Tax On Cryptocurrency In The UK?
If a cryptocurrency owner buys and ‘disposes of’ the digital currency as a personal investment, they will have to pay taxes on capital gains crypto UK. Cryptocurrency units are considered tokens by the HMRC in the UK. The following tax rules are applied:
- selling tokens for money
- the exchange of tokens from a new type of token
- using tokens to pay for the goods or services
- Transferring the ownership of tokens to another person
- The capital gains of disposing of the currency are as follows:
- 20 percent for additional taxpayers
- CGT on cryptocurrency UK is 10 percent, basic tax payer
- The tax-free allowance for the capital gains tax amounts to £12,300.
Procedure of Paying Tax On Cryptocurrency UK
The cryptocurrency owners have to report their gains on cryptocurrency in the annual self-assessment tax return. The HMRC’s real-time capital gains tax can also be used for the reporting service. Gains must be reported in pound sterling. It is essential to keep a record for tax on crypto gains UK. This includes all your activities regarding cryptocurrencies as well. You must keep a record for
- type of tokens
- date of disposing of the currency
- number of tokens that you have disposed of
- number of tokens that are left with you
- value of the tokens in the pound sterling
- bank statements and wallet addresses
- Accurate records of the UK capital gains tax cryptocurrency and pooled costs before and after disposing
What if You Buy And Trade Cryptocurrency as Part of Your Business?
However, some businesses and companies are interested in making investments in digital currency. They are interested to find out Is bitcoin taxable UK before investing. If you are carrying out any activities involving cryptocurrencies as a part of your business, then it will include:
- buying and selling of the exchange tokens
- The exchange of tokens for other assets
- ‘Mining
- Offering goods or services in return for exchange tokens
Conclusion
UK tax laws on cryptocurrency are evolving as the crypto market is relatively new globally. The cryptocurrency owners have to report tax on their self-assessment or company tax returns. However, this is a complex topic, and it would be best to get professional advice to avoid any legal matters.