How to Pay Tax on Cryptocurrency UK? – Step By Step Process

When it comes to cryptocurrency, people are divided into two camps: those who believe in it and those who don’t. The ones who believe in it see it as a new way of doing business that is more efficient and secure than traditional methods. The ones who don’t see it that way tend to view it as a scam or Ponzi scheme.

The reality is that cryptocurrency is not just a digital currency; it’s also a form of tax. Understanding how to pay taxes on cryptocurrency is essential if you want to keep your money safe and invest wisely. In this blog post, we will explore how you can pay cryptocurrency tax. We will also provide some tips on how to minimize your tax burden when it comes to cryptocurrency investments.

How much is Crypto Tax in UK?

Cryptocurrency is not tax-exempt in the United Kingdom. As a result, you will need to pay income tax and capital gains tax on any profits made from trading or holding cryptocurrency.

Income tax rates for individuals in the UK can range from 20% to 40%. Capital gains tax rates are also dependent on the price at which your cryptocurrency was sold, with a maximum rate of 20%.

If you’ve been trading cryptocurrencies in the UK, you may be wondering how to pay tax on these gains. The answer depends on a few factors, but generally speaking, if your total income from cryptocurrency trading is less than £10,000 in a year, you won’t have to pay any taxes on your profits.

If your total income from cryptocurrency trading is more than £10,000 but less than £50,000 in a year, then you’ll likely have to pay capital gains tax (which is different from regular income tax and is based on your overall wealth). If your total income from cryptocurrency trading is more than £50,000 in a year, you’ll likely have to pay both capital gains and regular income tax.

Keep in mind that there are some exceptions to this rule — for example if you’re self-employed or run your own business with cryptocurrency earnings as part of your sales activity. As always, it’s best to consult with an accountant who can help flesh out the details of your specific case.

What are the Tax Implications of Cryptocurrency?

Cryptocurrency is treated as property for the purposes of taxation in the UK. This means you are responsible for paying tax on any profit or loss from trading or using cryptocurrency.

When you sell cryptocurrency, you must declare the asset’s fair value at the time of sale. You will also need to pay capital gains tax if you make a profit on your investment.

If you hold cryptocurrency, you will be taxed on its intrinsic value – this is usually determined by multiplying your total holding by the current market value of Bitcoin and other cryptocurrencies. In other words, if you have 1 Bitcoin and the current market value is £11,000, then your tax liability would be 11 × £11,000 = £111.

There are a few exceptions to these rules – for example, if you are a ‘professional investor’, then some of the tax rules may not apply to you. You should speak to an accountant or tax specialist to learn more about your situation.

How to Pay Tax on Cryptocurrency UK? – Step By Step Process

If you are a UK taxpayer and have cryptocurrency holdings, paying tax on those holdings can be a bit complex. This is because cryptocurrency is classified as property rather than currency for tax purposes. Here are steps you can take to pay your taxes on cryptocurrency in the UK:

1. Decide how much tax you want to pay: There is no precise answer, as the amount payable will depend on your circumstances. However, most people will need to pay income tax and capital gains tax on their gains from cryptocurrency dealings.

2. Calculate your capital gain or loss: To calculate your capital gain or loss, you will need to work out your original cost of the cryptocurrency (this could be its purchase price or the value at which you sold it) plus any profits you made from selling it later on. If you sold it for more than its original value, then this will be treated as a capital gain; if you sold it for less than its original value, then this will be treated as a capital loss.

3. Deduct your expenses related to buying and holding the cryptocurrency (for example, fees paid to exchanges). You may also be able to claim contributions towards pension schemes made in relation to your Bitcoin holdings – check with HMRC for more information on these exemptions.

4. Calculate any taxes due based on your capital gain or loss and any relevant exemptions/deductions that have been taken into account in Step 3. This will result in a final tax liability that you need to pay.

5. Pay your taxes using the appropriate tax form(s), usually a Self Assessment Return (SAR). You can download and complete the relevant forms online or get help from an accountant or financial adviser.

6. If you are self-employed, you must provide proof of income and expenses to make a valid calculation of your tax liability.

7. If you are not a UK resident, you must contact the HMRC tax office in your home country to discuss your cryptocurrency tax situation.

Conclusion

Taxing cryptocurrencies in the UK can be confusing, but knowing the basics is important. In this article, we’ll explain how to pay tax on your cryptocurrency income and losses and discuss some of the possible scenarios you might find yourself in.