The United Kingdom’s tax service – better known as Her Majesty’s Revenue and Customs (HMRC) – has decided it’s time to launch its own framework and guidance for crypto enthusiasts come tax time. It has amended its existing tax laws to now include crypto assets, including outlining how much tax is payable based on the many different ways you can obtain crypto. Many in the crypto space are welcoming this new update from HMRC, as the lack of transparency in tax legislation has already led to numerous people around the world not declaring the right amount of tax from crypto activity.
Capital Gains Tax is Applicable
If you buy and sell crypto worth more than £500 – combined in a yearly period – it’s considered investment activity and is liable for capital gains tax. This means if when you come to sell your crypto positions and you make a profit, you have to pay tax on those profits. If this amount is considerably more then it will be seen as trading activity and will be eligible for income tax on profits and losses.
National Insurance Due for Crypto Earners
If you thought getting paid in crypto would get you out of paying your national insurance contributions, you would now be wrong. While this was the case until a few days ago, now any crypto received from an employer, mining activities, airdrops, or from providing services to blockchain projects will now be eligible for income tax and national insurance. It will be up to you as an individual to report this crypto income and pay the correct amount of taxes, so there is still room for “mathematical errors” in your calculations. While we don’t advise you pay the incorrect amount, as HMRC will eventually catch up with you, there is still room for error as it’s not automatically deducted from earnings.
Crypto Losses Could Be Good
Thankfully, just ask taxes will take part of your profits, taxes will be returned for your losses. If when you sell your position you make a loss, up to £3,000 can be deducted from your annual tax bill and this could push you into a lower tax bracket, earning you a rebate from HMRC. This means that if you carefully work out your trading activities you can manually control your tax bill by selling crypto at a loss.
France Shooting Down Tax Amendments
Just across the channel, the French haven’t been so welcoming to implementing sweeping tax reforms on crypto. Members from the French National Assembly proposed a myriad of changes to the current tax legislation to help stimulate French crypto activity and earn the nation more money via taxation. The majority of these proposals were shot down by Richard Ferrand due to his lack of knowledge in the crypto space.
While this comes as good news for Brits who were worried about not paying the correct amount of taxes, it also comes as a bit of a spoiler for many who were enjoying the freedom and uncertainty of crypto taxation in the country. If you are still unsure about how much tax you need to pay, it’s best to speak to a tax professional or consult with the recent HMRC crypto tax amendments.