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As the popularity of cryptocurrency as an investments increases, HM Revenue and Customs are starting to react to how this new form of investment will be taxed.


What is a cryptoasset (cryptocurrency)?

Cryptoassets are cryptographically secured digital representations of value or contractual rights that can be transferred, stored and traded electronically. There many different types including Bitcoin (BTC) and Ethereum (ETH).

They have fluctuating exchange rates that are driven by the market and you can buy and sell in exchange for other cryptocurrencies or for more common fiat currencies e.g. pounds, euros or dollars.
HMRC does not consider cryptoassets to be currency or money and more of a trade in shares, securities and other financial products.


How to tax profits or gains made on cryptocurrency: Individuals

Trading or investment?

  • If you are actively mining, or you are a dealer making multiple trades you may be treated as trading.#
  • If you are buying and holding then selling according to market conditions, you are investing. Your gains or losses will be taxed under Capital Gains Tax (CGT).

You can determine if you are trading for tax purposes by applying the Badges of Trade.

  • You should obtain tax relief on the direct costs of buying and selling the cryptocurrency investment.
  • You may offset your annual Capital Gains Tax (CGT) exemption if it is unused elsewhere.


Deduction of costs

The tax payable on the gain of disposing of cryptocurrency will be based on any gain. Your gain will be the sales proceeds less deductible costs. Deductible costs for cryptoassets that are subject to CGT will include:

  • The amount originally paid for the asset.
  • Transaction fees paid for having the transaction included on the distributed ledger.
  • Advertising for a purchaser or a vendor
  • Costs of obtaining a valuation to calculate gains or losses and some professional and exchange fees.

Any gains would be subject to the relevant tax rates for the individual in the tax year of sale.


Please note that this article only looks at the potential taxation of cryptocurrency and does not constitute any investment advice or recommendation. The information contained in our publications is not, and should not be read as, an offer or recommendation to buy or sell or a solicitation of an offer or recommendation to buy or sell any securities. You should seek professional investment advice if you have any questions regarding investments.


MATCH is working hard to keep on top of all the latest news and government support so, as always, feel free to get in touch if you have any queries and we’ll be happy to help.


MATCH Accounting Limited