The terminology, types of coins, tokens, and transactions can vary. The tax treatment of crypto-assets continues to develop due to the evolving nature of the underlying technology and the area in which crypto assets are used. The fats of each case need to be established before applying the relevant tax provisions according to what has actually taken place (rather than a reference to terminology). Our views may evolve further as the sector develops and HMRC may publish amended or supplementary guidance accordingly.
Selling Crypto assets
When you dispose of crypto-asset exchange tokens (known as cryptocurrency)you may need to pay Capital Gains Tax.
You pay Capital Gains Tax when your gains from selling certain assets go over the tax-free allowance.
When to check
You might need to pay Capital Gains Tax when you
- Sell your tokens
- Exchange your tokens for a different type of crypto asset
- Use your tokens to pay for goods or services
- Give away your token to another person (unless it’s a gift to your civil partner or spouse)If you donate tokens to charity, you may need to pay Capital Gains Tax on them.Work out if you need to pay
To check if you need to pay Capital Gains Tax, you need to work out your gain for each transaction you make. The way you work out your gain is different if you sell tokens within 30days of buying them.
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 Taxon. You still need to pay tax on the gain you make after you’ve received them.
You can deduct certain allowable costs, including the 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.
What counts as an allowable cost?
You can deduct certain allowable costs when working out your gain, including the cost of:
- Transaction fees paid before the transaction is added to a blockchain
- Advertising for a buyer or seller
- Drawing up a contract for the transaction
- Making valuation so you can work out your gain for that transaction
You can also deduct a proportion of the pooled cost of your tokens.
You cannot deduct costs:
- You’ve already deducted against profits for income Tax
- Of mining activities (like equipment or electricity)
Records you must keep
You must keep separate records for each transaction, including:
- Types of tokens
- The date you dispose of them
- Number of tokens you’ve disposed of
- Number of tokens you have left
- Value of the tokens in pound sterling
- A record of the pooled costs before and after you disposed of themYou may also want to keep other records such as wallet addresses.HMRC might ask to see your records if they carry out a compliance check.
Any crypto-asset exchange tokens you receive from employment or mining count as income.
If you receive tokens as income, you’ll need to keep records and may need to pa:
- Income tax
- National insurance contributions
You do not need to pay tax on tokens when you buy them, but you may need to pay tax when you sell them.
If you receive tokens from mining
If you receive tokens from mining and are not trading, the tokens will be treated as other taxable income
You’ll need to complete a Self-Assessment tax return in pound sterling unless you’ve received:
- Crypto assets worth less than £1000
- Less than £2500 from other untaxed incomeIf an employer pay you tokensCheck if the tokens your paid are classed as readily convertible asset (an asset that can be easily exchanged for cash)
If your income is a readily convertible asset
UK employers must pay your income tax and National Insurance contributions through PAYE before they pay you.
If they pay you in tokens, they estimate the value of them and pay income tax and National Insurance contributions based on the estimate. They’ll then deduct tax and contributions from other wages you receive in that period.
Your employer will pay income tax on your behalf if either:
- You’re only paid in tokens
- They cannot deduct the full amount from your other wages