• Mansoor Ahmad

Are you an accidental crypto tax avoider?

Updated: Jul 13, 2021

Were you an early Bitcoin invest

Were you an early Bitcoin investor or one of millions who now has invested financial interest in Crypto? If the answer is yes and you also happen to be a UK resident for tax purposes you then need to familiarise yourself with HMRC tax rules that apply to you.

Crypto investments have risen considerably over the years and it may be worth considering the impact of potential tax liabilities payable to HMRC since they have also taken interest in the gains being made.

Almost all Crypto profits fall under the tax categorise of Capital Gains, similar to buying and selling houses. The tax payable is the difference between the original cost of purchase and what you ended up selling it for. However before you start panicking and rush to sell off your investments to avoid the headache and pain of paying tax just remember you won't have to pay anything if its below £12,300. For tax purchases the year covers the period 6th April 2020 to 5th April 2021, not the traditional January to February as people assume.

Yes, that’s correct if you make up to £12,300 profit on Crypto in a tax year you pay no tax! That great news for the vast majority of newbies out there but for the early adopters you may find Bitcoin and Ethereum prices surpassed the exempt amount and taxes are now payable. However life is't always that easy and some trades within Crypto trading such as mining constitute being in business and therefore fall under different tax rules which mean you don't get the annual capital gains exemption so relevant tax advise should be sought to make sure your covered.

HMRC has written detailed notes regarding the treatment of Crypto and these provide useful insights on when you need to disclose your profits and avoid penalties being imposed.


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