Crypto is a new, fast-moving sector which has seen an increasing interest from individuals and companies alike. The law on taxes related to cryptocurrency is constantly changing as well.
The rapid growth in this sector has lead to a notable interest from HMRC, who are waiting with bated breath to ensure that all businesses, investors and traders are paying appropriate taxes from their crypto activity. Anyone active within this sector needs to ensure that they remain compliant with HMRC guidelines on crypto taxation Having one’s tax affairs structured properly would allow them to avoid any potential fines or any unplanned taxes.
How is Crypto Taxed?
In most cases, if an individual holds any crypto currency personally, they will be liable for Capital Gains Tax. However, it is essential to note that this sector in practicality is not as simple as just buying and selling.
Acquiring crypto via purchasing is just one of the many ways to hold such assets. But there are other ways like mining and staking as well that one cannot ignore. HMRC is not oblivious to this fact and hence dictate that the tax treatment will depend on the way crypto is acquired. This includes crypto that has been mined and not yet disposed of, may still be subject to UK income tax.
People dealing in crypto often are under this misconception that cryptocurrency must be sold in exchange of pounds (any traditional currency) to be subject to UK tax. Another common misunderstanding is that taxes will only become liable when the asset is disposed off (including selling, gifting, exchanging for another crypto asset) to purchase an item or service and more. As we mentioned above, a disposal would likely be subject to Capital Gains Tax. However, in certain circumstances HMRC may deem cryptocurrency to be subject to income tax. Since the guidelines on this are constantly changing, this is still a relatively grey area.
Please note that this is a new, fast-moving, sector. HMRC’s view and the guidance on crypto assets may well evolve further as the sector develops.
Can I invest in Crypto through my Limited?
The answer to that question is yes! Cryptocurrency can be purchased via a limited company, but it might not be the most tax efficient way to do this.
Please note that 3ES Accountants cannot provide any crypto related investment advice. We always encourage our clients to carry out their own extensive research for any investments they are planning to do.
If you plan to invest via your limited company, please ensure that the platform that you use to invest through should be under the name of your company or else the holdings will be viewed as personal in nature and applicable personal taxes will be liable. Additionally, any holdings under your personal name will be considered as a director loan and any gains registered will be subject to tax at the time of filing a self-assessment tax return; instead of being charged corporation tax on the gains through the limited company.
How Can 3ES Help?
Since cryptocurrency is a relatively new area, not all accountants know about it. Tax regulations still don’t explicitly lay out specific cryptocurrency legislation, and guidelines are constantly evolving.
It is of utmost importance to find a crypto accountant in the UK who understands the latest developments and is as invested as you are.
If you deal with crypto, be fully assured that we’ll help with:
- Cryptocurrency tax implications – both individually and through a limited company.
- Crypto Pooling – for any potential capital gain taxes.
- Preparation of self-assessment tax returns including gains from crypto trading.
- Trading Crypto via your limited company.
Contact us today and take the hassle out of understanding and being compliant with the tax regulations on cryptocurrency. We will answer any questions you may have about crypto and taxes, so speak to us today on 020 3603 0775 or request a call-back and we’ll be happy to assist.