UK crypto tax rates are a headache, whether you’re new to crypto or a veteran. Understanding HMRC’s stance on crypto taxes makes sure you don’t pay too little and face harsh penalties or pay more than you needed to! Learn about UK crypto tax rates for 2022 before the tax deadline.
Do you know what the Bitcoin tax rate in the UK is? How about other cryptocurrency tax rates for popular currencies like ETH, ADA or BNB?
UK crypto tax rates aren’t quite as straightforward as crypto investors would undoubtedly like it to be. This is because cryptocurrency in the UK doesn’t have its own tax treatment. Instead, crypto is taxed subject to Income Tax or Capital Gains Tax - or both in some instances!
The tax you’ll pay on crypto investments depends on a variety of factors, including the type of transaction, how HMRC views it and the amount you earn in regular income.
Don’t worry - we’re breaking down everything you need to know to figure out UK crypto tax rates and dates in this article.
How the UK taxes crypto
Crypto in the United Kingdom is seen as an asset, not a currency. It doesn't matter whether you're looking for Bitcoin tax, Ether tax or any other crypto - it's all treated as the same kind of asset. This makes it subject to Capital Gains Tax, as well as Income Tax for some specific transactions.
It is well worth noting that this article only refers to crypto tax rates for individual investors, not those trading as a business. You can find specific guidance on crypto tax rates for businesses in the UK here.
UK Tax Deadlines 2021 - 2022
The 2021 tax year starts on April 6th 2021 and runs until April 5th 2022. There's some important dates you need to be aware of for filing your taxes:
30th December 2021: If your tax liability is less than £3,000, if you file your online Self Assessment Tax Return by this date, your taxes will be collected via your tax code.
31st January 2022: Deadline for Self Assessment Tax Returns for previous tax year (ending on 5th April 2021) .
1st April 2022: Financial year begins.
5th April 2022: 2021/2022 tax year ends.
6th April 2022: 2022/2023 tax year starts.
5th October 2022: Deadline for registering for Self Assessment registration.
31st October 2022: Deadline for Self Assessment Tax Returns submitted by post.
30th December 2022: Deadline for online Self Assessment Tax Returns (ending on 5th April 2022).
How and when is crypto taxed as income in the UK?
The HMRC guidance on when crypto is considered income is very clear. Individual investors will need to pay Income Tax and National Insurance Contributions on:
A little further note on airdrops - the reason you receive them dictates whether they’ll be subject to Income Tax or not. If you receive an airdrop without doing anything in return, this would not be subject to Income Tax. However, if you’re being rewarded for some kind of service, this will be subject to Income Tax. Examples of service in this instance could include being rewarded for previously holding a certain coin or token or sharing a social media post.
You may also need to pay Capital Gains Tax if you later dispose of any crypto assets received through any of the means above.
Your crypto tax rate for ‘earned’ crypto depends on the Income Tax band you fall into.
UK Income Tax Allowances
If you earn less than £1,000 in additional income this isn't subject to Income Tax, thanks to the trading and property allowance. If you’ve earnt less than £1,000, you don’t need to declare it to HMRC. If it’s more than £1,000, you’ll need to declare this in your Self Assessment Tax Return.
The UK also has a personal allowance of £12,570 which you’ll pay no tax on. You don’t get a personal allowance on income if you earn more than £125,140.
UK Income Tax Bands 2021 - 2022
Your crypto tax rate will be the same as the highest tax band you fall into as it is considered miscellaneous income. You’ll pay anywhere between 0% to 45% in tax.
It’s important to note you don’t pay the same flat rate of Income Tax on all your earnings. For all English and Welsh taxpayers (bar those earning over £125,140) you’ll have £12,570 tax free. Then you’ll pay 20% tax on your next £37,699 of income and 40% on the next £99,729 of income and 45% in tax on any income over this amount.
Scottish taxpayers have slightly different Income Tax Bands. See here.
How to work out how much you owe in crypto income tax
It’s easy to work out how much you owe in crypto income. Follow these steps:
- Identify your Income Tax Band. Any additional income will be taxed in this band, or the band above if you reach the threshold.
- Identify any crypto assets considered to be income by the HMRC over the course of the last financial year.
- Calculate the FMV of these assets. You can do this by identifying the fair market value (FMV) in GBP on the day you received them. Koinly does this for you.
- Add up the total value of the assets in FMV. This is your total additional income from crypto.
- Add your additional income to your regular income and look at which Income Tax Band you fall into. This is your crypto tax rate.
In one financial year, you earned £40,000 from your job and £8,000 in crypto income. Your total earnings are £48,000.
Your regular income already puts you in the basic rate band of 20% and your additional income from crypto doesn’t put you into the higher rate band. It is, however, over the £1,000 trading and property allowance.
You’ll pay 20% in tax on £7,000 of your earnings so £1,400.
How and when is crypto taxed as a capital gain in the UK?
Because crypto is viewed as an asset in the UK, when you ‘dispose’ of it by selling, swapping or spending it, this is seen as a disposal of an asset and subject to Capital Gains Tax.
Not all of your disposed assets are subject to Capital Gains Tax, only the perceived profit from disposing of it. For example:
- Profits from selling crypto for fiat currency.
- Profits from swapping crypto with crypto.
- Perceived profits made from gifting crypto (excluding to spouse).
- Using cryptocurrency to purchase goods and services.
Short and long-term gains in the UK
Unlike in many other countries, the HMRC treats short and long term gains the same. So you’ll pay the same crypto tax rate regardless of whether you hold it for a few months or a few years.
UK Capital Gains Tax Free Allowance
Everyone in the UK gets a Capital Gains Tax allowance. It's also known as the Annual Exempt Amount and it's no small sum of £12,300 per person, per year.
If you have less than £12,300 in gains, you won’t pay any capital gains tax and you don’t need to report this to the HMRC.
UK tax rate on crypto gains
The amount of Capital Gains Tax you’ll pay on your crypto gains depends on your regular income and the Income Tax Band you fall into.
How to work out how much you owe in Capital Gains Tax
It's easy to work out your crypto tax rate for capital gains. Just follow these steps:
1. Work out your taxable income. You can do this by subtracting your personal allowance (£12,570) from your income.
2. Work out your total taxable gains from crypto investments. Koinly does this for you.
3. Subtract your Capital Gains Tax Allowance (£12,300) from your total taxable gains.
4. Add the remaining amount to your taxable income.
5. If this is within the basic income tax band, you'll pay 10% in tax on your capital gains from crypto. If this is in the higher rate or additional rate tax band, you'll pay 20% in tax on your capital gains from crypto.
You earn £40,000 a year. Subtract £12,570 from this, leaving you with £27,430.
You made £20,000 in capital gains from crypto investments. Subtract £12,300 from this, leaving £7,700.
£27,430 + £7,700 = £35,130. You’re still within the basic rate income band. So you’ll pay 10% on the remaining £7,700 of your capital gains, a total of £770 in tax.
Are any crypto transactions exempt from tax in the UK?
Yes! There are some crypto transactions that are not subject to Income or Capital Gains Tax in the UK. These include:
- Buying crypto with fiat currency.
- HODLing crypto.
- Transferring crypto between your own wallets.
- Gifting crypto to a spouse.
Gifting crypto to a spouse in particular is important for UK crypto investors. You can use this to optimise your tax position by making the most of your own and your spouse's personal allowance and individual Capital Gains Tax allowance, so your household will pay less in Capital Gains Tax overall.
When to file UK crypto taxes
The UK tax deadline is the 31st of January 2022. You need to report any income from crypto or capital gains from crypto in your self assessment tax return by this date.
Ideally, you’ll want to submit your tax return before this point as you also need to pay any taxes due by midnight on the 31st of January 2022.
How to file UK crypto taxes with Koinly
There are a couple of ways to file your crypto taxes in the UK.
If you only have capital gains taxes to pay, you can report any capital gains or losses as they happen using the Government Gateway Service. Of course, this relies on you knowing and keeping track of any capital gains or losses as they happen on each transaction. This is much easier with crypto tax software like Koinly.
If you have crypto taxes that are subject to income tax, you'll need to include these in your Self Assessment Tax Return. You can also include capital gains in this tax return if you'd rather not report gains and losses in real time.
You can file the Self Assessment Tax Return online or post a form in.
If you've not filed an online return before, you'll need to do this at least 20 working days before the tax deadline to give yourself time to register. There are different ways to register depending on whether you're self-employed or employed.
You'll need to keep good records of your crypto transactions including the FMV on the day you purchased, the FMV on the day you sold and any subsequent capital profits or losses, as well as any crypto 'earnings' perceived as income.
You submit these records to the HMRC, who calculate what you owe based on what you report. You need to pay your Self Assessment Tax Return bill by midnight on the 31st of January 2022.
Koinly can help you do all of this by identifying the different types of tax applicable to your crypto transactions, calculating your crypto taxes and generating specific forms, like your HMRC Capital Gains Summary.
We have loads more helpful tax tips in our UK crypto tax guide.