4 years after their last update on the taxation on gains from cryptocurrencies, and following pressure from tax specialists who stated that previous guidance could be confusing to small investors, HMRC have issued a further update to clarify their tax treatment.
Following todays' announcement we have now updated our last article, first issued in March.
Current Cryptocurrency Tax Rules
1. HMRC have clarified that gains from crypto-trading are not classed as winnings from gambling as many investors had hoped, and are in fact treated as assets which will incur capital gains tax upon disposal.
It therefore follows that, if you were to buy crypto currency you don't have to declare it until you sell it.
2. If you receive a cryptocurrency as payment, as with other assets it will be assigned a market value in GBP.
3. Once you then sell the asset you would then take the GBP value and calculate the gain (or loss) which has been made.
4. When making a purchase with a cryptocurrency, you would treat your purchase as though you have sold your cryptocurrency holding and calculate tax base upon the difference between your purchase and sale price.
5. You would treat the value of your cryptocurrency as with any foreign currency and convert to GBP for UK taxation purposes.
It is also worth noting that in the 2018/19 tax year, HMRC will allow a personal tax-free allowance for Capital Gains purposes of £11,700. This is the amount of gain which can be made tax free upon the disposal of your cryptocurrencies, or any other asset.
If you are unsure as to your tax obligations with regard to your cryptocurrency trading, contact us now via the link below or comment:
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If you have concerns about buying or selling cryptocurrency and how this affects your personal income tax position, we can help review your situation and offer advice. Alternatively, let us know what you think in the comments section below, or get in touch with us.
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Any advice in this publication is not intended or written by Marine Accounts to be used by a client or entity for the purpose of (i) avoiding penalties that may be imposed on any taxpayer or (ii) promoting, marketing or recommending to another party matters herein.