Are there tax implications on crypto assets for individuals?
Crypto assets are treated as intangible assets by HMRC. This is the case even where the crypto mimics currency e.g. stablecoins. Therefore, transactions involving any crypto assets can trigger tax implications, even where transactions in physical currency do not.
Does moving crypto between wallets trigger tax charges?
If you are moving crypto tokens between wallets you own, there is no transaction, and therefore there are no tax charges. However, if you are converting such tokens from one form to another, this is treated as selling the old tokens and buying new ones. This means it is possible for there to be a taxable capital gain or loss.
Are crypto payments from an employer subject to income tax and national insurance contributions?
Payments from an employer would normally be subject to income tax and national insurance contributions (NIC). If you are paid by your employer in crypto assets, this will be taxed in the same way as cash, i.e. it will be subject to income tax and assuming there is a ready market, Class 1 NIC.
Are profits from mining or staking subject to income tax and NIC?
Crypto assets received from mining or staking transactions are subject to income tax. If the activities amount to a trade this would then also attract Class 2 and 4 NIC. However, it would be unusual for transactions in crypto to amount to a trade as this requires a level of commercial organization.
Are airdrops taxable?
If an airdrop has been earnt as a result of other tokens being held, or as a result of carrying out a service, these will be subject to income tax. If this is part of a trade, this could be subject to NIC as well. However, it is likely that no tax will apply on receipt if this is without doing anything in return, and isn’t part of a trade or business involving crypto.
Are crypto assets subject to Capital Gains Tax when sold?
If crypto is sold for profit, it is likely that Capital Gains Tax (CGT) will apply. This will be at a rate of 10% or 20% for gains over the annual exemption (currently £6,000).
Can crypto losses be relieved?
If an individual is trading, losses can be offset against future profits or other taxable income during the year. Otherwise, if profits would be subject to income tax, losses may be able to be carried forward to set against future profits.
If capital losses are made on disposal or on crypto assets which have become worthless, these can be offset against future capital gains. These can be made through the sale for less than the original purchase, or if the crypto asset has become worthless, through a negligible value claim.
Is there tax relief for theft or fraud?
Theft is not a disposal of an asset, because you continue to own it. This means there is no capital loss to be claimed. If you don’t receive tokens that you’ve bought, or if tokens are worthless when you buy them you also won’t be able to claim a capital loss.
Is there tax relief for the loss of private keys?
Misplacing your private keys and not being able to access your tokens does not count as a disposal for CGT purposes, as the tokens still exist despite being inaccessible. However, if you can show that there is no prospect of recovering those private keys or accessing the tokens, a negligible value claim could be made to HMRC.
Can crypto transactions trigger stamp duty charges?
Transfers of crypto assets are unlikely to be chargeable to stamp duty. However, if there is payment for the transfer of shares in crypto, this would remain subject to stamp duty.
Can crypto assets be treated as property for inheritance tax purposes?
This means that it will form part of your estate and could be subject to an Inheritance Tax of up to 40%. They should therefore form part of your overall inheritance tax planning strategy. You may also want to consider how to leave sufficient information securely so that your beneficiaries can access this crypto on your demise.
Is it possible to use crypto to pay a tax relievable pension contribution?
This is because crypto isn’t viewed by HMRC as currency or money so the tax relief on such a contribution to a pension would be denied. It is still possible to put the assets into a pension scheme, however, albeit without any tax advantage on the way in.
Crypto transactions can have a myriad of tax implications. If you would like more information on this, please contact Krista Woodman at firstname.lastname@example.org or Tamara Shaw at email@example.com