Tax Treatment of Cryptoassets - Rough Guide

HMRC treats most Cryptoasset disposals as subject to Capital Gains Tax, not gambling or currency. This article covers the basics for UK individuals.

Background Information

Crypto is not “money” for UK tax. Each disposal — selling, swapping, gifting (other than to spouse), or using crypto to buy goods — can trigger CGT.

CGT Computation

Use Section 104 pooling: all tokens of the same type are pooled; acquisition costs averaged.Allowable costs: purchase price, transaction fees, professional fees.

Worked Example

• Bought 2 BTC for £20,000 each.

• Later bought 1 BTC for £30,000.

• Sold 1.5 BTC at £35,000 each.Pool average cost ~£23,333/BTC.Gain per BTC ~£11,667, multiplied accordingly.Deduct annual exemption (£3,000) and apply 10%/20% (non-residential asset) CGT rates.

Income Tax Issues

• Staking or airdrops may be taxable as income when received.

• If you are trading at scale, HMRC may argue it’s a trading business subject to Income Tax.

Reporting

Disclose gains on Self Assessment. Keep records of transactions, wallet addresses, and valuations in GBP.

Closing Paragraph

Crypto taxation is particular complex area of tax law including; pooling, matching rules and income classification and for tailored tax advice you can book in a free discovery call with one of our tax team here to see how we can help. https://calendly.com/flowaccandtax/discoverycall".