How to avoid paying tax on cryptocurrency

A disposal for UK tax purposed may occur if Cryptocurrencies are sold for cash, used to buy other assets with a value or exchanged for another Cryptocurrency. But, it’s really important you keep records of your crypto transactions so you can how to avoid crypto taxes uk keep a detailed account of your cost basis. This makes sure you can accurately calculate your crypto gains and losses later on. If you run your own business, any crypto income should be dealt with as being part of your trading profits.

how to avoid tax on cryptocurrency uk

It all depends how you’re earning your crypto and how much profit you’re making. As we have detailed above, the amount of CGT depends on the rate of tax you pay. If you’re a higher rate taxpayer there are several strategies you can use to decrease your taxable income and lower the amount of CGT you have to pay as a result. Depending on your earnings, paying into a pension will reduce the CGT on a gain from 20% to 10% because pension contributions extend the higher end of your tax band by the amount of the contribution.


If they are transferred out of trading stock, the business will be treated as if they bought the crypto at the value that’s being used in the trading accounts. This value can then be used as an allowable cost when they decide to dispose of the crypto assets. They say if you receive a liquidity pool token in exchange for your crypto – it’s a disposal. You can add up your cost basis based on tokens you’ve sent to the pool and then subtract that amount from the fair market value of the tokens at the point of disposal.

how to avoid tax on cryptocurrency uk

So, if you have a crypto portfolio, something which is becoming more and more popular; in the same way as with a shares portfolio that makes gains, paying taxes on crypto funded gains will also be necessary. This is because according to HMRC the cryptoassets would be treated as being already located in the UK for a UK resident taxpayer, so the income would therefore be treated as automatically remitted to the UK. You cannot offset capital losses arising on the disposal of cryptoassets against your income. In general, gains on cryptoassets are calculated in the same way as gains on shares. Different types of cryptoasset are treated as separate assets, so you need to calculate the gain on each type of cryptoasset separately.

Is Ravencoin Worth Mining On A PC And Is It Profitable In 2023?

The way HMRC is able to deal with individuals’ cryptocurrency taxes depends on what type of exchange they were using. Now that we’ve covered everything there is to know about crypto capital gains, let’s move on to crypto income and income tax. If you fail to report any liability for tax on cryptocurrency gains, you could be liable for prosecution. When preparing your crypto tax documents, you’ll need to report on any income or profits you’ve made. So keep a record of everything, including the equivalent value of your crypto in £GBP when you bought, sold, swapped, gifted or spent it. As with all income, investing into a pension is a great way to reduce your personal tax liabilities.

The income, in this instance, will be the fair market value of the crypto at the time you receive it. Rewards or fees received in exchange for mining activity will also be added to your taxable income. The ‘bed and breakfasting’ rules provide that if a cryptoasset is sold and reacquired within 30 days, the calculation of any capital gain uses the reacquisition cost rather than the original amount paid.

Tax free crypto UK

Income tax is usually applied to those buying, selling or receiving cryptocurrency through a trade. Any rewards or fees received in exchange for mining activity will also be added to your taxable income. But crypto tax software is just as good at helping you to pay less tax, when you use it strategically.

  • So it is the asset you dispose of that you’ll pay Capital Gains Tax on, if you’ve made a gain.
  • The transfer is said to occur at ‘no gain, no loss’ because the recipient inherits the base cost of the asset being transferred.
  • In other words, they are content to purchase crypto and hang onto it, rather than trading it in for a profit.
  • When you buy tokens, add the amount you paid for them to the appropriate pool.
  • While not introducing many drastic changes, for many crypto lovers this was another sign of the tax body’s growing interest in the financial area.
  • Accordingly, cryptoassets are subject to Income Tax and National Insurance contributions on the value of the asset.
  • Blissfully simple accounting software perfect for small businesses.

If these are exchanged or subject to income tax on acquisition then the value of the asset will need to be calculated. Capital gains on cryptocurrencies of the same type need to be calculated by following ‘pooling’ rules with normal matching rules applying. It is also important to realise that a disposal of cryptocurrency takes place not only when they are exchanged for cash, but also if they are used to make purchases of other cryptocurrencies. As a relatively new type of asset, cryptocurrencies and blockchain technology have resulted in several uncertainties over their taxation.

Advantages and disadvantages of private limited companies

Privacy is important to us, so you have the option of disabling certain types of storage that may not be necessary for the basic functioning of the website. This is a distinct possibility and may include a reduction in the annual tax-free allowance, among other changes. The rules can also be complicated meaning it’s advisable to seek professional help to ensure you’re using the most efficient method of CGT reduction and that you stay within the rules. Other exemptions include gifts to your spouse, civil partner or a charity, and a small number of assets such as ISAs, Premium Bonds and prizes from betting or playing a lottery. None of us want to pay more tax than we have to, and if there’s a way to avoid it most of us would jump at the chance.

In these circumstances, the employee must reimburse their employer within 90 days of the end of the tax year. Pooling provides a method of simpler Capital Gains Tax calculations. We have a lot of information about the UK tax situation for Crypto and NFT on our website which you may want to read before getting in touch. Get in touch with our crypto specialist accounting team and find out where you stand. It’s not possible to report salaries to HMRC in terms of crypto so for the calculation of deductions everything has to be converted into £ sterling.


If you pay the basic rate, you’ll usually pay 18% on second home sale gains and 10% on profits from selling assets. You will need to value the cryptoasset income you receive from mining by converting it to pounds sterling using the exchange rate on the date you receive it. Daily exchange rates for cryptocurrency can be found on websites such as coinbase. For certain types of cryptoassets, such as Bitcoin, you can earn rewards in that cryptoasset by ‘mining’. This is a reward for devoting time and energy to solving complex mathematical puzzles.

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