Do I need to declare my cryptocurrency to HMRC? UK

private key

Evidence of any Crypto Taxes in the United Kingdom will need to be proved if the loss of the asset arises as a result of the accidental destruction of a private encryption key or fraud. It will be rare to regard investing in Cryptoassets as trading, although ‘mining’ may indicate a trading activity. We help our clients understand Cryptocurrency tax implications in United Kingdom and work to take the uncertainty out of compliance and tax reporting to HMRC. We’re already seeing more clarity on indirect tax rules as countries get to grips with aspects such as digital imports and platform economies. However, the innovation and speed around NFTs is outstripping the ability of tax policy makers to keep up.

Which country has no tax on cryptocurrency?

Seychelles: The Seychelles is a tax-free destination for cryptocurrency traders and investors. The country has no capital gains tax, no income tax, and no VAT, making it an attractive destination for crypto enthusiasts.

You will be notified by letter if HMRC is investigating you for tax evasion. You cannot appeal against an investigation, but it is wise to instruct a tax barrister at the earliest opportunity. Naseems Accountants provide professional tax consultancy & accounting services to small, medium and large businesses in Birmingham, as well as the rest of United Kingdom. With Connect, every company or exchange will share their transaction details with HMRC upon request.

Calculating your capital gains: Cost-basis Example

Germany, for example, doesn’t charge tax on profits from crypto sales if you hold your crypto for over a year. If you regularly give to charity or don’t need all the profits from your crypto investments, you can donate your crypto to charity. This can be a great way to reduce some of your Capital Gains Tax burden. Transfers between spouses and civil partners are tax-free in the UK. This means you can gift crypto to your partner to reduce your personal liabilities, effectively doubling your tax-free thresholds to £25,140 for Income Tax and £24,600 for Capital Gains Tax. Yes, there are four crypto transactions that aren’t subject to Income Tax or Capital Gains Tax.

trading profits

Exchange tokens such as Bitcoin are located for tax purposes where ever the beneficial owner is resident. In the US, 2018’s Supreme Court decision on South Dakota v Wayfair Inc had broad implications for the collection of sales tax for remote sellers. This is likely to include revenue from an NFT sales sourced to a customer in a US state. And while the analysis is complicated, the conservative viewpoint would characterise NFTs as digital goods – which are taxable in over half the US states with a sales tax or equivalent.

Can HMRC track cryptocurrency

Additionally, we will inform you about the most well-known tax breaks for digital currencies and cryptocurrency in the UK. The US’s Internal Revenue Service views crypto assets as capital assets, meaning the user has to pay taxes on any profits from selling them. The tax rate on crypto transactions involving staking and mining varies from 0-37% for income tax.


For working out capital gains or losses, individuals will need to retain records of their acquisitions of crypto to enable them to accurately compute the gain or loss for the tax year of disposal. It’s worth saying here that this is a grey area because there’s no reporting guidance from HMRC. The best approach is to declare this in the same way as you would mining. That’s to say you’d pay income tax on any staking or lending income at your regular income tax rate. If you received payment in a cryptocurrency, you’d need to calculate the fair market value of the coins based on when you received them.

How much tax will I need to pay on my cryptocurrency?

If you your crypto for more than you bought it, you’ll need to pay Capital Gains tax on the difference . If the value of your crypto keeps rising, you may also need to pay Capital Gains Tax on the profits when you exchange it for £GBP. If you earn rewards from staking crypto, any tokens you’re awarded are classed as miscellaneous income. If you use a computer to verify transactions in the blockchain, any rewards you receive are classed as miscellaneous income.

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