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Do you want to learn more about crypto taxes? Or are you looking to declare your cryptocurrency transactions to the tax administration? We aim to answer all your questions and set you on the right path to declare your crypto taxes in the UK. In this guide, we will be covering the following:
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When Should I Declare My Cryptocurrencies?
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How Are Cryptocurrencies Taxed in the UK?
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What is the Tax Rate on Cryptocurrencies in the UK?
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Do I Need to Pay Tax on Crypto If I Haven't Converted My Crypto to GBP?
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How Do I Calculate a Gain or Loss on My Crypto Transactions?
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Can I lower my taxes by selling and rebuying on the same day?
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Can the HMRC Find Out About My Crypto?
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Are There Penalties for Late Declarations or Not Declaring Crypto to the HMRC?
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Can I Correct Previous Tax Returns?
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How are mining, staking, getting paid in crypto and airdrops Taxed?
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How are trades, purchasing goods & services, and gifts Taxed?
This guide will be updated and maintained regularly to account for changes made by HMRC and new types of transactions. Suppose you find any errors or outdated information. In that case, it is greatly appreciated that you let us know by sending an email to [email protected] or via our support chat at the bottom right corner of our website.
When Should I Declare My Cryptocurrencies?
Tax Year Duration: The tax year you need to consider for declaring cryptocurrencies starts on April 6th, 2022, and ends on April 5th, 2023. You should report all cryptocurrency transactions within these dates.
Paper Tax Return Deadline: For those submitting a paper tax return, the deadline is midnight on October 31st, 2023.
Online Tax Return Deadline: If you are filing your tax return online, you need to submit it by midnight on January 31st, 2024.
Tax Payment Deadline: Regardless of the method of submission, the deadline for paying any tax you owe is midnight on January 31st, 2024.
Source: Gov.uk - Self Assessment Tax Returns Deadlines
How Are Cryptocurrencies Taxed in the UK?
Cryptocurrencies are subject to taxation in the UK under two main categories: Capital Gains Tax and Income Tax.
Capital Gains Tax
Capital Gains Tax applies to various cryptocurrency transactions, including:
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Selling Crypto: When you sell cryptocurrencies for more than you paid for them.
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Trading: Exchanging one type of cryptocurrency for another.
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Goods & Services: Using cryptocurrencies to purchase goods or services.
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Gifting: Transferring crypto to someone else, except to your spouse or civil partner.
For Decentralized Finance (DeFi) transactions, they could be taxed as either capital gains or income, depending on the nature of the transaction.
Typically, it's treated as capital gains when you send or dispose of crypto. If instead you are earning cryptocurrencies it is likely seen as income tax. However, if your activities qualify as a trade, Income Tax takes precedence.
Income Tax
Income Tax applies to cryptocurrency in scenarios such as:
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Employment: Receiving cryptocurrencies as part of your employment compensation.
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Mining: Earning crypto through mining activities.
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Staking: Earning rewards for staking cryptocurrencies.
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Airdrops: In certain instances, receiving cryptocurrencies through airdrops.
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Income from DeFi: Earnings derived from various DeFi activities.
Untaxed Cryptocurrency Transactions
Not all cryptocurrency transactions are subject to tax. Here are some common scenarios where taxes generally do not apply:
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Buying Crypto with Fiat Currency: Purchasing cryptocurrencies with fiat money, like GBP, is not a taxable event.
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Holding Crypto: Simply holding onto your cryptocurrencies, without any kind of transaction or exchange, does not incur a tax liability.
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Transferring Between Your Own Wallets: Moving your cryptocurrencies between wallets you own is not taxed.
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Donating Crypto to Charity: Donating cryptocurrencies to a registered charity may not be subject to tax.
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Gifting Crypto to Your Spouse: Transferring cryptocurrencies to your spouse or civil partner is not a taxable event.
We'll delve into more detail for each transaction type further down the guide.
What is the Tax Rate on Cryptocurrencies in the UK?
In the UK, the tax rate for capital ginas on cryptocurrencies is 10% to 20% over the £6,000 tax-free allowance. For crypto income the income tax rate is between 20% and 45%, depending on your income, with a personal allowance of £12,570.
Capital Gains Tax
For Capital Gains Tax, if your gains exceed the tax-free allowance of £6,000 for the tax year 2023/24 (This was £12,300 for the 2022/23 year), the rates are between 10% and 20%. The specific rate depends on your other taxable income. More details can be found on the Gov.uk Capital Gains Tax Rates page.
Income Tax
For Income Tax, rates apply to earnings over the personal allowance, which is £12,570 for 2023/24. The rates are:
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Basic Rate (20%): Up to £37,700
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Higher Rate (40%): Up to £125,140
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Additional Rate (45%): Above £125,140
Note: These figures already have the allowance deducted. Including the allowance, the thresholds are £50,000 for the higher rate and £150,000 for the additional rate. Further information on allowances is available in this Commons Library briefing.
Do I Need to Pay Tax on Crypto If I Haven't Converted My Crypto to GBP?
In the UK, you don't need to pay tax on cryptocurrency just for holding it. However, trading cryptocurrency for another is taxable, with capital gains calculated based on the value change from acquisition to trade.
How Do I Calculate a Gain or Loss on My Crypto Transactions?
When you're dealing with crypto transactions, understanding how to calculate your gain or loss is crucial. There are three parts to your gains/loss calculations
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Cost Basis: Your cost basis includes the purchase price of the crypto plus any related fees. If you've received crypto from staking or mining and paid income tax on it, the cost basis is the value of the crypto at the time you received it. You can subtract this amount from your sale price to determine your gain/loss
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Sale price: How much are you selling your cryptocurrency for, or what was the value at the time of disposal
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Fees: Fees can be deducted from sales transactions, and can added to the cost basis of purchased crypto. This allows you to lower your taxes.
Things do get a bit messier when you have a fee in a crypto to crypto trade
This is trickier because it involves both a sale and a purchase. While the fee is deductible from both transactions, it can only be used once.
The Taxation of Chargeable Gains Act 1992 (TCGA92/S52(4)) suggests a fair method is to split the fee 50/50 between the sold and acquired assets. For those of you using Divly for your taxes, Divly adheres to this approach for ease and fairness.
For detailed guidance, refer to the HMRC manual on crypto assets (Crypto22150).
Can I Offset Crypto Trading Losses Against Other Income?
When it comes to crypto trading losses, it's important to understand how they can impact your tax situation. Essentially, you can offset your losses against any capital gains you've made. This strategy is beneficial as it can help you reduce your overall capital gains tax liability.
In the UK, every individual has a £12,300 capital gains tax-free allowance for the tax year 2022/23 (decreased to £6,000 for 2023/24). This means if your total gains are under this threshold, you don’t have to pay any capital gains tax. If you've incurred losses, these can be used to bring your total gains below the allowance, effectively avoiding capital gains tax.
To carry forward losses, it's crucial to report these losses to HMRC on your self-assessment tax return. This step is necessary to formally recognize your losses, which can then be used to offset future gains.
🔍 Capital Gains Tax Example
Situation: Alice has made £15,000 in capital gains from crypto trading in the tax year. However, she also incurred £5,000 in trading losses.
Action: Alice reports her £5,000 loss to HMRC on her self-assessment tax return.
Outcome: Her taxable gains are now £10,000 (£15,000 gains - £5,000 losses), which is below the £12,300 tax-free allowance. Therefore, Alice does not have to pay any capital gains tax for that year.
Can I lower my taxes by selling and rebuying crypto on the same day?
It might seem advantageous to sell an underperforming crypto asset and then rebuying it just to take advantage of the potential tax loss. However, in the UK this won’t be possible.
Same-Day Rule (TCGA92/S105 (1)(a))
Under the Same-Day Rule, if you buy and sell coins on the same day, then your sells will first be matched to any purchases on that day. This prevents you from taking advantage of unrealized losses without changing your portfolio.
It's important to note that all tokens bought or sold on the same day are considered part of a single transaction for tax purposes.
If you sell more coins than you purchased on that day, you then proceed to the next rule.
🔍 Anna's Crypto Trading Strategy
Anna owns 10,000 ADA (a cryptocurrency), which she originally bought for £10,000. Currently, the value of her ADA holdings has dropped to £6,000. To realize a tax loss without significantly changing her portfolio, Anna decides to sell and then rebuy a portion of her ADA.
Anna's Transactions
Initial Sale: Anna sells all 10,000 ADA for £6,000.
Rebuy on the Same Day: She then immediately rebuys 5,000 ADA for £3,000 on the same day.
Anna's goal is to claim a tax-deductible loss of £4,000, which is the difference between her original purchase (£10,000) and her sale price (£6,000). However, the calculation doesn't work out as she expects due to the Same-Day Rule.
Calculating the Loss
Under the Same-Day Rule, transactions on the same day are linked. Here's how Anna's loss is calculated:
- Linking the Sale and Purchase: Since Anna rebought 5,000 ADA on the same day she sold, these must be matched first.
- First Part of Sale: The 5,000 ADA she rebuys for £3,000 are considered sold from the same day's transaction.
- Second Part of Sale: The remaining 5,000 ADA are considered from her original holdings, bought for £5,000 (£10,000 original total / 2).
Loss Calculation:
For the First 5,000 ADA: No loss or gain, since she sold and rebought at the same price (£3,000).
For the Second 5,000 ADA: Sold for £3,000 (half of £6,000), but cost was £5,000. This results in a loss of £2,000.
Final Result
Instead of the £4,000 loss Anna anticipated, her actual tax-deductible loss is £2,000. This is because the Same-Day Rule requires her to match her rebuy on the same day to the corresponding sale, impacting the loss calculation.
Bed & Breakfast Rule (TCGA92/S106A(5) and (5A))
This rule applies when you sell coins and repurchase them within the same 30-day period, provided they don't fall under the Same-Day Rule. For such transactions, you use the cost basis from that 30-day period.
You should use the The First-In, First-Out (FIFO) to determine which cryptocurrency from the 30-day period that you are selling
If you sell more coins than you repurchased in the following 30 days, you would then move to the next applicable rule.
🔍 Anna hasn’t learnt her lesson
Anna initially sold 10,000 ADA and then rebought 5,000 ADA on the same day. Later, she decides to rebuy another 5,000 ADA the next day to maintain her portfolio balance.
Anna's Transactions
Initial Sale and Same-Day Rebuy: Anna sold 10,000 ADA and rebought 5,000 ADA on the same day.
Next Day Purchase: She buys an additional 5,000 ADA the following day for £2,000.
Anna's initial intention was to realize a £4,000 loss, but the tax calculations tell a different story due to the Same-Day Rule and the Bed & Breakfast Rule.
Tax Calculation
Same-Day Transaction: First 5,000 ADA: Sold and rebought on the same day for £3,000, resulting in no gain or loss.
Bed & Breakfast Rule for Next Day's Purchase: Second 5,000 ADA: The next day, she buys 5,000 ADA for £2,000. These are matched with the 5,000 ADA she sold but did not rebuy on the same day. Sale price: £3,000 (half of her initial £6,000 sale). Purchase price: £2,000. This results in a £1,000 gain.
Final Outcome
Despite her intention to incur a loss, Anna ends up with a taxable gain of £1,000.
Section 104 Rule (TCGA92/S104(3)):
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Pooling of Assets: when individual tokens can't be identified, they are grouped into a 'pool'. This pool treats all the tokens of a particular cryptocurrency as a single entity for tax purposes.
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Separate Pools for Each Cryptocurrency: Each type of cryptocurrency you own must have its own separate pool. This means Bitcoin, Ethereum, and others each have their own distinct pools.
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Exception for NFTs: Since Non-Fungible Tokens (NFTs) are unique and identifiable, they don’t require pooling.
🔍 Example of Section 104 Rule: Pooling in Action
Initial Pool
Alex buys 100 CryptoCoins for £1,000 (each coin costing £10).
Pool: 100 coins, £1,000 total value.
Selling Tokens
Alex sells 20 CryptoCoins.
Outgoing Cost basis: 20 coins × £10/coin = £200.
Remaining Pool: 80 coins, £800 value.
Adding Tokens
Alex buys 50 more CryptoCoins for £600 (£12/coin).
New Pool: 130 coins (80 + 50), £1,400 total value (£800 + £600).
Now, each coin in Alex's pool has an average cost of £1,400 / 130 ≈ £10.77. This method averages the cost of all coins, simplifying gain or loss calculations for sales.
Looking for more examples? Check out the [HMRC crypto asset manual)(https://www.gov.uk/hmrc-internal-manuals/cryptoassets-manual/crypto22250)
Can the HMRC Find Out About My Crypto?
HMRC has the capability to track your cryptocurrency transactions, and they are increasingly active in doing so. This capability stems from the inherent properties of cryptocurrencies and their digital ledger technology, which provides a transparent record of transactions.
Gurvais Grigg, a former FBI Assistant Director and CTO at Chainanalysis, highlighted the uniqueness of crypto transactions:
"Unlike other forms of fraud in fiat, with cryptocurrency in the blockchain… there's a record… and that transparency and speed of accessing that record globally, make investigations of these types of fraud accelerate over traditional finance."
The HMRC may also reach out to crypto exchanges and request client information.
A key example of this is the ongoing agreement between HMRC and Coinbase UK.
Coinbase has publicly stated that they have cooperated with HMRC by turning over transaction details for users who received more than £5,000 worth of crypto assets in their Coinbase account during the tax year.
You can read more about this in an article from The Block.
As government efforts to monitor and regulate cryptocurrency transactions intensify, the likelihood of HMRC becoming aware of your crypto activities increases.
In case it's discovered that you haven't paid taxes on your transactions, you could face fines from the government. Therefore, it’s vital to track and declare your cryptocurrency transactions as soon as possible to stay compliant and avoid potential penalties.
Are There Penalties for Late Declarations or Not Declaring Crypto to the HMRC?
When it comes to declaring crypto assets to HMRC, timely and accurate reporting is crucial to avoid penalties.
Late Filing Penalties: If you miss the deadline for filing your tax return, HMRC imposes a late filing penalty. This penalty starts at £100 for tax returns that are up to 3 months late. The longer the delay, the higher the penalty can get.
Late Payment Penalties: Besides late filing, you'll also face penalties for paying your taxes late. The amount depends on how much tax is owed and how late the payment is.
Penalties for Errors: Making errors on your tax return or other related paperwork can also attract penalties, especially if these errors lead to an understatement or misrepresentation of your tax liability.
However, if you've taken "reasonable care" in preparing your return, you might not face a penalty.
What constitutes "reasonable care" can vary, but it generally means that you've made a genuine effort to accurately report your financial situation.
For more details, you can refer to the Low Incomes Tax Reform Group.
Appealing a Penalty: If you believe you have a reasonable excuse for late filing or payment, you can appeal the penalty.
Examples of reasonable excuses include being unaware of legal obligations, it may be argued that not everyone is aware of their legal obligations regarding some of their crypto activity.
For a more comprehensive list of what constitutes a reasonable excuse, visit HMRC's guide on tax appeals. It's important to note that during the appeal process, you don't have to pay the penalty until a resolution is reached.
To estimate the penalty you might face for late filing or payment, HMRC provides a useful tool on their website: Estimate Self-Assessment Penalties.
Can I Correct Previous Tax Returns?
Online Tax Returns
If you've filed your tax return online and realized you need to make corrections, there are steps you can follow to update it:
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Wait for 3 Days: After submitting your tax return, wait for 72 hours before attempting to make any changes.
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Sign In: Use your Government Gateway user ID and password to sign in here.
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Navigate to Your Tax Account: Once logged in, choose the 'Self Assessment account' option.
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Access More Details: Select 'More Self Assessment details'.
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Go to 'At a glance': From the left-hand menu, choose 'At a glance'.
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Select 'Tax return options': Here, you can choose the tax year for the return you wish to amend.
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Amend Your Tax Return: Enter the tax return, make the necessary corrections, and file it again.
Paper Tax Returns
For those who have filed paper tax returns, the process is different. You can find detailed guidance on how to correct paper tax returns here.
Corrections for Previous Years
If you need to make changes to a tax return for previous years, you'll have to write directly to HMRC. In your letter, you should include:
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The tax year you're correcting.
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Why you think you've paid too much or too little tax.
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How much you think you've overpaid or underpaid.
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Your signature.
If you're making a claim for overpayment relief, also include:
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A statement that you're making a claim for overpayment relief.
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Proof that you paid tax through Self Assessment for the relevant period.
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How you want to be repaid.
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Confirmation that you have not previously tried to claim back this refund.
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A signed declaration stating that the details you've provided are correct and complete to the best of your knowledge.
How are various Income Tax Transactions Taxed?
How is Getting Paid in Crypto taxed?
If you're receiving cryptoassets as part of your employment, it's important to understand the tax implications.
In the UK, getting paid in crypto is considered as receiving “Money’s worth” and is therefore subject to both income tax and National Insurance contributions. This classification is detailed in the HMRC's Cryptoassets Manual.
Taxation at the Point of Receipt
When you receive cryptoassets as employment income, you are taxed on the value of the crypto at the time of receipt. This means that the amount of income tax and National Insurance you owe is based on the market value of the crypto at the time it's provided to you, not when you choose to sell it or convert it to fiat currency.
Capital Gains Tax on Future Disposal
Additionally, any future disposal of these received cryptoassets is subject to capital gains tax. This applies if there's a change in the value of the crypto between the time you received it and when you sell or convert it. If the value of the crypto has increased since you received it, you may have a capital gain that needs to be reported and taxed.
Readily Convertible Assets (RCAs) & Employer’s Obligations
Cryptoassets are considered Readily Convertible Assets (RCAs) if trading arrangements exist, or are likely to exist, as defined by section 702 of the Income Tax (Earnings and Pensions) Act 2003.
Since exchange tokens like Bitcoin can be traded on various exchanges for money, HMRC views that trading arrangements for these assets do exist or are likely to exist at the point they are received as employment income.
When cryptoassets provided as part of employment are RCAs, the employer is required to account to HMRC for both the tax and National Insurance contributions. This is based on the best estimate of the value of the cryptoasset at the time of provision.
Employers can find guidance on their obligations regarding cryptoassets and tax in the HMRC's manual.
How is Mining Income Taxed in the UK?
When you receive cryptocurrency from mining activities, it's important to know that this income is subject to tax. Here's what you need to consider:
Filling in a Self Assessment Tax Return: If you receive cryptocurrency, you generally need to fill in a Self Assessment Tax Return under 'Other Taxable Income'. This is required unless:
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You receive less than £1,000 in miscellaneous income, or
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You earn less than £2,500 from other untaxed income .
Taxation of Token Value: The value of any tokens you receive as a result of mining, measured in pounds at the time of receipt, is taxable as miscellaneous income.
Expenses and Allowable Costs: While certain expenses can reduce your taxable charges, it's important to note that electricity and equipment costs incurred during mining are not considered allowable costs for tax purposes.
Determining Business Activity: The nature of your mining activities can also influence how your income is taxed.
Factors such as the degree of activity, organization, risk, and commerciality could lead HMRC to view your mining as a business. If this is the case, your mining income might be considered part of your trading profit and subject to Income Tax in the same way as other business incomes.
How is Staking Taxed in the UK?
Staking rewards are taxed as income when received, and any disposal of these rewards, can trigger capital gains tax.
Tax on Staking Rewards: When you earn rewards from staking, they are subject to tax at the value at which you receive them. This is typically considered as income and taxed accordingly.
Capital Gains Tax on Disposal: If you later dispose of your staking rewards (like selling them), you must pay capital gains tax on any increase in their value since you received them.
Liquidity Provision and Disposal: Currently, if you need to provide liquidity (e.g., crypto assets) to stake on a Decentralized Finance (DeFi) platform, this act is seen as a disposal of your assets. Consequently, you need to pay capital gains tax on this transaction.
For example, if you give up Ethereum (ETH) and Tether (USDT) in exchange for a liquidity token, you will be liable to pay tax. The tax is calculated on the disposal of ETH and USDT based on the value at the time of disposal, minus the acquisition costs of the ETH and USDT you disposed of.
Potential Changes It’s important to note that there has been a consultation published in April 2023 regarding the taxation of DeFi activities involving lending and staking. This consultation suggests changes that might no longer consider such activities as a disposal for tax purposes.
However, until these changes are officially enacted, the current tax rules apply.
How Are Airdrops Taxed in the UK?
Airdrops represent a unique scenario where crypto is deposited to your wallet or account by a third party.
Airdrops are typically not taxable when received without any reciprocal action. This means if you get an airdrop without having to perform any service or task, it's not subject to immediate taxation.
However, the situation changes if the airdrop is received as compensation for a service. In such cases, the airdrops are treated as miscellaneous income. This makes them subject to Income Tax.
It's important to note that any future disposal of these airdropped assets would be subject to Capital Gains Tax. This tax applies to the profit you make when you sell or exchange the airdropped cryptocurrency.
How are Crypto Forks Taxed in the UK?
In many countries forks are taxed at the moment of receipt, based on the market value of the new cryptocurrency at that time.
Luckily for us, In the UK the situation is different. If you receive a new coin due to a fork, you're not taxed at the time of receipt. Instead, the new coin inherits the cost basis of the original cryptocurrency from which the blockchain split. This approach means you'll only be taxed when you dispose of the new coin, under the Capital Gains Tax regime.
How are Capital Gains Transactions Taxed?
How is Selling Cryptocurrency for GBP Taxed?
When you sell your cryptocurrency for fiat currency (like GBP, USD, EUR), it is considered a disposal for tax purposes. The key point here is that the sales price is determined by the value of the fiat currency you receive in exchange.
For instance, if you sell Bitcoin and receive GBP in return, the amount of GBP is your sales price. This amount is crucial for calculating any capital gains or losses. These gains or losses are then subject to Capital Gains Tax. It's important to accurately record the amount of fiat currency received to ensure proper tax reporting.
How is Trading Crypto for Crypto taxed?
Trading one cryptocurrency for another can seem complex tax-wise, as it's not always apparent what the GBP value of the transaction is. However, you can determine this value by referring to the fair market value of the crypto assets on the day of the trade.
You might use the price listed on the exchange platform where you made the trade, or refer to a price aggregator like Coingecko or Coinmarketcap. This determined value is crucial for calculating any capital gains or losses.
How are Stablecoins taxed in the UK?
It's important to note that stablecoins, despite their stable value (often pegged to a currency like the USD), are still considered cryptocurrencies. Transactions involving stablecoins are therefore subject to Capital Gains Tax.
For example, even if 1 USDT (a common stablecoin) is typically equivalent to 1 USD, fluctuations in the USD/GBP exchange rate can lead to a gain or loss when you trade USDT.
Goods & Services
When you use cryptocurrencies to pay for goods and services, it's considered a disposal of those cryptocurrencies. The critical aspect here is determining the fair market value of the crypto at the time you spent it. This value becomes your sales price for tax purposes. Calculating the fair market value accurately is essential for determining any potential capital gains or losses, which are then subject to Capital Gains Tax.
Gifts
Gifting cryptocurrencies has its own tax implications:
To Spouse or Civil Partner: Gifts made to your spouse or civil partner are tax-free. There's no tax liability for either party in this scenario.
To Others: For gifts to anyone else, tax rules differ. The market value of the cryptocurrency at the time of the gift is considered your disposal proceeds. This means you may have to pay Capital Gains Tax on any gain that has accrued on the crypto up to the point of gifting, based on this market value.
Which transactions are tax free?
Derivative Products*
Derivative products, including those related to cryptocurrencies, have a unique position in the UK.
In the UK, spread betting is categorized as gambling. Therefore, it's not subject to Capital Gains Tax. This offers a tax advantage for those engaging in spread betting, including crypto-based spread betting.
The Financial Conduct Authority (FCA) has imposed a ban on selling crypto derivative products without explicit consent from the FCA. This creates a legal grey area for those involved in such activities.
If you've participated in crypto derivatives, it's advisable to consult with a tax advisor or lawyer to navigate these complexities.
In your Divly report, you'll find that derivative gains and losses are separated from your capital gains.
Buying Crypto Is Not taxed
When you spend fiat currency to buy cryptocurrency, it's important to know that this action is not taxed. The initial purchase of crypto with fiat (like GBP, USD, etc.) doesn't trigger any tax liabilities.
It's only when you dispose of the crypto (by selling, trading, or using it for purchases) that potential tax implications arise.
Hodling is not taxed
Hodling your cryptocurrency is a passive action and has no immediate tax implications. While you're holding:
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You're not earning any income from the crypto directly.
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You're not realizing any capital gains or losses.
Essentially, keeping your crypto untouched in your wallet doesn't incur any tax liabilities.
Do be aware that If you are staking while hodling your crypto then this will be subject to taxes.
Transferring Crypto Between Your Own Wallets is Not Taxed
Transferring cryptocurrency between wallets that you own is generally not considered a disposal for tax purposes. This means:
- No capital gains tax is due when you simply move crypto from one wallet to another if both are under your control.
However, there's an important point to note regarding transfer fees:
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If you pay a fee in cryptocurrency for the transfer, this fee is considered a disposal of that portion of crypto.
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Unlike fees in trading or purchasing scenarios, transfer fees are not an allowable cost. They don't add to the cost basis of your transferred crypto.
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These fees might therefore lead to a taxable event, and you may need to calculate and report any capital gain or loss associated with the fee.
How to File Your Own Crypto Taxes Easily
We’ll cover two main areas here: first, how to obtain the necessary figures you need to report, and second, we’ll direct you to our step-by-step guides for filling your crypto taxes on the HMRC’s online tax portal.
Although this information is applicable to anyone, we’ll frequently reference declaring figures that Divly’s tax platform generates for you.
Using Divly’s Crypto Tax Platform to Declare Your Cryptocurrencies
Divly was founded on the idea that one-size-fits-all reporting was not sufficient for the unique requirements of each country.
Therefore, Divly is a crypto tax platform designed to follow HMRC’sCryptoassets Manual. Divly provides everything needed for your declarations in forms SA100 and SA108. You can find samples of Divly’s UK tax reports here.
By uploading your transaction history from your exchanges to Divly, the platform will automatically import all transactions and label your transfers between wallets. Divly then performs the necessary tax calculations.
For more benefits, visit our features page, but some key ones include:
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Tax filings for 2021 and earlier years at the price of only 1 year.
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Localized tax reports for the UK
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Support for over 150 exchanges and wallets.
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Compatibility with over 10,000 crypto assets.
Four Steps to Getting Your Taxes Done with Divly
Step 1: Create a Divly Account
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Account Creation: Register an account on Divly by providing an email and password, or use your Google account for convenience. Create an account here.
- Note: Divly values your privacy; no need to provide sensitive information like your name or social security number.
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Set Preferences: After registration, select your country, local currency, and preferred language. These choices are crucial as they determine the tax rules, currency conversions, and output applicable to you.
Step 2: Import Your Transactions
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Add Wallets & Exchanges: Start by clicking on the 'Add Wallets & Exchanges' button.
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Choose Import Method: Depending on your wallet type, opt for the Automatic Import or File Import method. The default option is usually the best choice.
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Add Remaining Wallets: Continue adding all your wallets, including exchanges and hardware wallets. It’s essential to import all transactions to accurately calculate your tax obligations.
Step 3: Review Your Transactions
Note: Most everything is fine and no edits are required to be made. In this case, you can move on to the next part of the guide and declare your taxes.
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Verify Crypto Balances: Check your total crypto holdings on the Overview page to ensure they match your actual holdings. Discrepancies might indicate missing or incorrect transactions.
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Examine Wallets and Transactions: Confirm all wallets are imported. If any are missing, add them via 'Add Wallets & Exchanges'.
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Resolve Transaction Warnings: Address any warnings related to missing price information or purchase history. Divly’s guides can assist in resolving these.
Step 4: Download Tax Report + Declare Taxes
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Select Tax Year: On the Tax Report page, select the year you are declaring for, e.g., 2023.
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Generate Tax Report: Click 'Generate Tax Report 20XX' and select the report you would like to download. The UK export comes with two files: one with an overview of what you need to declare, and the other is an itemized list of your transactions
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Lock Your Transaction History: Once declared, lock your transaction history. This way, you can safely import future transactions for future declarations without any accidental changes for years you’ve already declared.
Alternative to Crypto Tax Software
An alternative to using crypto tax software is the use of an accountant specialized in cryptocurrency taxes for the UK. While using an accountant can mean higher hourly costs, it also allows for a more personalized approach.
How do I declare my cryptocurrencies to the HMRC?
When it comes to declaring cryptocurrency gains and losses on your UK tax return, it's crucial to understand the correct forms and sections to complete. Here's a guide to help you navigate this process:
1. Self Assessment Tax Return (SA100)
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Crypto Income: Report any income you've made from cryptocurrencies in Box 17 of the SA100 form. This includes income from mining, staking, or any other crypto-related earnings.
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Capital Gains Summary: If you've made capital gains from selling or exchanging cryptocurrencies, tick 'Yes' under the Capital Gains Summary section on the SA100. This signals the need to fill out the Capital Gains Summary form (SA108).
2. Capital Gains Summary (SA108)
For the SA108 form, you'll need to provide detailed information about your crypto transactions. This includes:
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Number of Disposals: Count all sales of the same cryptocurrency on the same day as a single disposal.
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Disposal Proceeds: The total amount you received from these disposals.
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Allowable Costs: Costs incurred that are deductible, like purchase costs and transaction fees.
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Gains Before Losses: The total gains made before accounting for any losses.
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Losses in the Year: Any losses incurred during the year from your crypto transactions.
Additional Requirements
- Computation List: It's important to include a detailed list of computations for your capital gains. This should show how you arrived at the figures you're reporting, including the purchase and sale prices, and the calculation of gains or losses.
Filing Online
To file your tax return, you can use the UK government's online tax platform. Simply visit www.gov.uk/log-in-file-self-assessment-tax-return to log in and file your Self Assessment tax return electronically.
Update Timeline
December 6th - 2023 Added Our UK tax guide
Any tax-related information provided by us is not tax advice, financial advice, accounting advice, or legal advice and cannot be used by you or any other party for the purpose of avoiding tax penalties. You should seek the advice of a tax professional regarding your particular circumstances. We make no claims, promises, or warranties about the accuracy of the information provided herein. Everything included herein is our opinion and not a statement of fact.
