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Daisy M. Silanno

Cryptocurrency exchange

Guide to Crypto Taxes in the United Kingdom for 2024

Crypto Taxes in the United Kingdom

There are thousands of types of cryptocurrencies, the most popular examples are Bitcoin (BTC) and Ethereum (ETH). Whereas fungible assets like BTC, ETH and even the fiat Pound (£) are worth https://www.tokenexus.com/crypto-taxes-in-the-united-kingdom/ the same amount, every NFT is unique, with its own characteristics and digital identifier. Given the complex nature of crypto tax this is an in depth guide with a lot of information!

HMRC has very specific guidance on what constitutes an allowable cost in cryptocurrency. These are costs that can be added to your cost basis; transfer fees are not included. As a result, we can safely assume that transfer fees cannot be added to your cost basis and, in some cases, would be considered disposals. It is critical to understand that you do not pay the same flat rate of Income Tax on all of your earnings. All English and Welsh taxpayers (except those earning more than £125,140) will receive a tax-free allowance of £12,570.

Share pooling rules and average cost basis accounting

UK crypto investors can pay less tax on crypto by making the most of tax breaks. Let’s look at how much Capital Gains Tax you’ll have to pay on your cryptocurrency. As a result, whenever you sell, trade, spend, or gift cryptocurrency in the UK, you will be subject to Capital Gains Tax. If the employment income is taxed via PAYE and you do not meet the criteria for filing a Tax Return, there is no need to include the employment income on a Tax Return. Sometimes NFTs are received as a placeholder redemption mechanism in order for you to remove your position from a liquidity pool or other DeFi type activity.

Crypto Taxes in the United Kingdom

Yes, in the UK you are required to pay taxes on certain crypto transactions. If you make profits from selling cryptoassets, you may need to pay Capital Gains Tax. If you receive cryptoassets as a form of payment or through mining, you may be subject to Income Tax and National Insurance contributions.

Selling crypto for fiat currency

If crypto is disposed of for less than its allowable cost (i.e., sold at a loss), then the loss can be deducted to reduce the overall capital gain. You can also claim total losses for crypto if the value has dropped to zero or a minimal amount. If an individual runs a business profiting from cryptocurrency trading, income tax rules take priority over capital gains. Calculating capital gains and losses from your crypto transactions becomes more complex when you have multiple transactions to account for. The UK requires a specific type of method for calculating the cost basis of your coins known as Shared Pool Accounting. Reporting gas and transaction fees come with benefits from a tax perspective.

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