Please note that we only work with UK residents.
Cryptocurrency, the decentralised digital currency, has surged in popularity in recent years. While many will recognise the term ‘bitcoin’, there’s now thousands of different cryptocurrencies available, all of which have the potential to become the next big coin.
As well as bitcoin, some of the most popular cryptocurrencies include XRP, Litecoin, Dogecoin, Ethereum and Cardano, and they are popular with investors looking to make a very lucrative living from them.
Cryptocurrency is particularly popular amongst the younger generation, thanks to platforms like Reddit and cryptocurrency ‘champions’ such as Elon Musk.
People have made enough money to last a lifetime purely from taking a punt on crypto, which has only helped it to snowball in popularity amongst those looking to follow suit.
We accept Bitpay, and offer a 10% discount off your fees if you pay with either Bitcoin or Ethereum ????
What Tax Is Owed on Cryptocurrency?
The tax owed on cryptocurrency varies depending on how you acquired it. If you mined your cryptocurrency, this counts as a form of self-employed income. Any earnings over £1,000 from self-employment will require you to pay income tax and National Insurance.
However, you may be able to expense the resources used for mining such as computer parts, electricity, broadband bills and more, but only if you’re doing this as a business. If you mine cryptocurrency on a small scale for fun or as a hobby, you wont be able to claim business expenses.
If you have invested in cryptocurrency and have subsequently turned a profit from selling it, you will need to pay capital gains tax on profits over £12,300. This is the Capital Gains Tax allowance that is tax free, and can vary each yar. You will only pay tax on the profits that go above this tax-free threshold.
If you’ve made a loss on your cryptocurrency investments and sales, it’s also possible to carry the loss forward and claim it next year. This lets you claim a loss as an expense.
For further information, we highly recommend checking out the Government’s official documentation:
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Why Use Dead Simple Accounting
At Dead Simple Accounting, we understand the intricacies involved with paying tax on cryptoassets. Whether you’re mining as a hobby or running a business solely around cryptocurrency investment, we can take care of the boring paperwork.
We can guide you through the entire process, from registering as self-employed to completing your self-assessment and filing them with HMRC. We can also help you report and pay your Capital Gains Tax.
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Our Pricing
At Dead Simple Accounting we charge just £275 including VAT for self-assessment tax returns, and can take you through the entire process.
If you’re interested in other services, such as setting up a company or payroll, head over to our quote page for a free and instant estimate.
What Expenses Are Associated With Cryptoassets?
As mentioned previously, it depends on how you acquired the cryptocurrency. If you are mining the cryptocurrency yourself as a business, you may be able to claim expenses for:
- Computer components
- Electricity
- Broadband
- Servers
- Accountant fees
- Digital wallets
- Secure storage (such as a ledger)
Expenses can only be claimed if incurred wholly and exclusively for the purposes of your trade.
If you invest and sell cryptocurrency, you will have to pay Capital Gains Tax, but there are ways to offset any losses. This is a complicated process, which is exactly where we can help. You may also be able to expense the following:
- Accountant fees
- Fees associated with buying or selling (e.g. exchange fees)
Cryptocurrency Accounting FAQs
Ideally you do need a tax advisor that fully understands cryptocurrency. HMRC have been very clear about crypto and the tax obligations associated with it, so it’s best to enlist an expert.
Yes, cryptocurrency earnings are taxable in the UK. Earnings from cryptocurrency could be subject to both income tax and capital gains tax.
Crypto earnings can be reported on your annual self-assessment tax return, or HMRC’s capital gains tax reporting service.
You can claim crypto losses on taxes, but they do need to be claimed within four years of the end of the tax year in which the loss arises.
Useful Resources
These days there’s an abundance of tools and resources at your disposal, software that handles your invoices and expenses, to mobile based banks that cut the boring paperwork.
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