Do you owe tax on cryptocurrency in the UK?

If you’re currently dealing with cryptoassets or have done so in the past, you likely have a tax liability from this. Previously, it was unclear how tax on cryptoassets would be treated, but HMRC have now clarified their position.

How has HMRC’s stance on crypto tax has changed?

In 2014, HMRC likened cryptoassets to gambling, suggesting that it was a highly speculative transaction, which led to the belief that crypto trading gains were not subject to taxation.

As cryptoassets continued to grow in popularity, the need for HMRC to clarify their position on crypto tax was evident. They now explicitly state that gains from buying and selling crypto assets are taxable (likely subject to capital gains tax), and the practice is no longer considered similar to gambling.

Do you have to pay taxes on Crypto?

Even though financial institutions do not consider cryptoassets to be money or currency, HMRC classifies them as taxable and treats them similarly to shares. Depending on the type of transactions made, they will be subject to Capital Gains Tax and/or Income Tax.

How Much Tax Do You Pay on Crypto in the UK?

If your capital gains surpass the £6,000 tax-free allowance, you’ll be subject to pay 10% or 20% tax. Any additional income that exceeds the personal allowance will be taxed according to your Income Tax band, which ranges from 20% to 45%.

It should be noted that for the 2024/25 financial year, the tax-free allowance for capital gains has been reduced to £3,000. Also, don’t forget to report your losses so you can use them to offset future gains.

Is HMRC able to track crypto?

Yes, HMRC can track cryptoasset transactions. Through a data-sharing program with UK exchanges, HMRC has access to transaction data from as early as 2014 and ‘Know Your Customer’ information provided during exchange or wallet sign-ups. Using the information from exchanges such as Crypto.com, HMRC can monitor crypto activity and target those who aren’t fulfilling their tax obligations. This has resulted in ‘nudge’ letters being sent out by the tax authority, which requests that these individuals and companies report their crypto activity.

How can SG Umbrella help?

Whether you are currently trading with cryptoassets, or have done so in the past, you must complete a tax return and declare your assets. Here at SG Umbrella, our specialist tax team can offer advice on your crypto tax return, or complete it for you. Get in touch with us today to see how we can help.