Cryptocurrencies are proving volatile at the moment with values tanking and then picking up again as the market fluctuates.
But with an estimated more than two million currency holders in the UK, many may not be aware of their tax obligations when they sell their assets
HM Revenue & Customs (HMRC) is contacting taxpayers who they believe hold cryptoassets, advising them of the potential capital gains tax (CGT) implications.
You might need to pay Capital Gains Tax when you:
If you donate tokens to charity, you may need to pay Capital Gains Tax on them.
Work out if you need to pay
Your gain is normally the difference between what you paid for an asset and what you sold it for. If the asset was free, you’ll need to use the market value when working out your gain.
You do not need to pay Capital Gains Tax on the value of the tokens that you’ve already paid Income Tax on. You’ll still need to pay Capital Gains Tax on the gain you make after you’ve received them.
You can deduct certain allowable costs, including a proportion of the pooled cost of your tokens when working out your gain.
You can also use capital losses to reduce your gain, but you’ll need to report them to HMRC first.
If your total taxable gain is above the annual tax-free allowance, you must report and pay Capital Gains Tax.
What counts as an allowable cost
You can deduct certain allowable costs when working out your gain, including the cost of:
You cannot deduct:
How to report and pay
If you need to report and pay Capital Gains Tax, you can either:
The amount of tax due might be different if you are not a resident in the UK. If you complete a tax return, you must complete it in pounds sterling.
Records you must keep
You must keep separate records for each transaction as HMRC might ask to see your records if they carry out a compliance check.
For help and advice on related matters, contact our expert team today
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