Crypto assets and tax clarification

The main updates bring greater clarity and uniformity to HMRC’s stance on crypto asset taxation in areas such as transferring coins between ledgers, staking and crypto currency as a form of gambling.

HMRC clarified that any income derived from staking is taxable. The process happens when holders of particular crypto currencies ‘stake’ an element of their holding to support the creation of the blockchain in return for reward. From now on rewards derived from staking will need to be accounted for as miscellaneous income on a tax return.

HMRC also provided clarity around the movement of coins between ledgers in relation to how a cost basis is calculated. The new guidelines determine that the coins would remain at the original cost basis when moved. Therefore the cost would be carried forward for any future disposal.

Despite the volatile nature of markets and the views of some that crypto currency is more akin to betting than investing, the new guidelines confirm that the Government does indeed see the process as investing rather than gambling.

Currently crypto assets are therefore taxed under capital gains tax in the UK in much the same way as stocks and shares. There are exceptional circumstances where individuals may be classified as traders in which case income tax would apply as any gain could be classed as personal income.

You must ensure that your gains on any crypto assets are reported to HMRC within the Self-Assessment system, where the usual tax reporting requirement criteria are met. We are always here to help.