Tax Compliance

Cryptocurrency tax compliance

The UK rules for Cryptocurrency Tax, whether you are trading or holding Crypto as an investment, means that may need to file a tax return if you have made any profits or gains. You may not be aware that even if you have transferred gains from one currency to another, this triggers a tax event, and you could be subject to an HMRC enquiry.

In the UK, Crypto is regarded as an asset, meaning it can be subject to Capital Gains Tax (CGT), when it is disposed of and that includes selling, swapping or spending to pay for goods and services. Crypto can also be subject to income tax if it received as payment, for mining or staking.

Your tax position is determined by the nature and frequency of your Crypto activities, and your investor intentions. Your Crypto activities will dictate how they are taxed.

Let us guide you on this. At aventae, we help you check your tax position to ensure you're reporting to HMRC correctly.

Key tax implications of Crypto activities

In the UK, Cryptocurrencies are generally treated as assets, not currency, and are subject to existing tax laws, primarily Capital Gains Tax (CGT) or Income Tax. Let’s look at the implications:

Capital Gains Tax (CGT)

CGT typically applies if you are holding Crypto as an investment, usually for long-term capital appreciation.

Taxable event: CGT is due on the gain you make when you dispose of Crypto assets.
Losses: Where a loss has been made at the time of disposal, there is a potential for lodging this loss claim with HMRC so that you can fall back on this loss relief in the future.
Disposals include: Selling Crypto for pounds sterling, exchanging one token for another, or using Crypto to pay for goods and services.
Complexity: The calculation of the gains and losses that you make from your Crypto activities requires care in line with the Capital Gains Tax rules. We can advise you on this, and advise you on the information that you can gain from your Crypto platforms.
When all or part of your gain could be exempt: Each year, for Capital Gains Tax purposes, you have a tax free amount which is your annual CGT exemption and this is available to reduce your gain. However, depending on the level of your proceeds from disposals, you may still be required to complete and file a Self-Assessment Tax return to HMRC.

Income Tax

Income Tax and National Insurance may apply if you receive Crypto as a form of income.

Taxable income: This includes Crypto received from activities such as mining, staking rewards, lending rewards, liquidity pool rewards, or receiving payment for goods and services rendered.
Trading: In exceptional circumstances, if you are frequently and systematically buying and selling with the intention of making a profit, your activity may be classed as a trade rather than an investment, with your profits or losses being subject to Income Tax and National Insurance rules.

How we support your Cryptocurrency tax compliance

Dealing with Crypto Tax requires detailed transaction records and specialist knowledge to apply the correct matching rules and classifications. We are able to prepare your self-assessment tax returns and ensure you have the correct reporting of all your Crypto activities, trading, gains or losses.

Aventae support provides:

Activity classification

We will determine whether your Crypto activities are subject to Capital Gains Tax (as an investor) or Income Tax (as a trader or from income-generating activity). This isn’t always a clear cut decision, but we can apply HMRC guidance to ensure that you are in the right tax position.

Profit or loss calculations

We calculate your taxable gains and allowable losses, applying the appropriate pooling and matching rules to your transactions.

Tax efficiency review

We would review your strategy with you to use your gains, losses, reliefs and exemptions in order to minimise your tax liabilities.

HMRC reporting

Ensuring that all of your Crypto activities are correctly reported on your Self Assessment Tax Returns.

Record-keeping

Advising you on the necessary documentation you must maintain for compliance, including transaction records and valuations at the various stages of your activities.

You need an adviser you can trust to help you manage the tax efficiency of your Cryptocurrency.

Get started on Cryptocurrency tax compliance

The tax position for Crypto is under increasing scrutiny by HMRC, with new global reporting frameworks (such as the Crypto Asset Reporting Framework) set to provide HMRC with more data from exchanges. It is critical to ensure you are fully compliant now.

Let's have a conversation about how you can ensure good record keeping and reporting for your Crypto, and ensure your peace of mind.

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