Having the right strategy to deploy as a crypto trader can endorse the fact that the crypto market has been proven to be massively profitable; as very many investors had been considered to have earned reasonable amounts.
In the view of this, the UK government via His Majesty’s Revenue & Customs (HMRC) had been working on recovering unpaid taxes from successful investors and traders as the national taxing authority.
Subsequently, a disclosure facility had been put to exercise for citizens having irregularities in their tax affairs arising from crypto asset transactions.
More so, an international framework called Crypto Asset Reporting Framework (CARF) is also working alongside HMRC across borders in ensuring that information as regards crypto assets will be automatically shared. Also have in mind that information is being shared directly from crypto platforms and exchanges.
You must thereby know your tax level when it comes to dealings as regards cryptocurrencies in UK and this article will give you good insight on how much tax you’ve got to pay on cryptocurrency in the UK.
How Much Tax do You Pay on Cryptocurrency in the UK?
Taxes as regarding crypto are basically put into two categories which are; Capital Gains Tax and Income Tax. The former ranges from 10% to 20% as applicable to crypto disposing while the latter ranges from 20% to 45% as applicable to crypto received as payment or mining rewards.
Capital Gains Tax (CGT): Are applicable to the profit made from the sale or disposal of an asset that has appreciated in value including cryptocurrencies. The tax is basically on the gain and not on the total amount amassed. It also differs as dependent on the type of asset and your taxable income.
The income range of 12,571£ to 50,270£ for Basic rate is 10%, for Higher rate is 20% for 50,271£ to 125,139£, and for Additional Rate of over 125,140£ is 20%. Moreover, UK offers 3,000£ as the current Annual Exempt Amount (tax-free allowance) for 2024/2025 tax year.
For instance, if your annual income is 80,000£ and you’ve made a 15,000£ gain from selling Bitcoin. Deduct the tax-free allowance from your gain:
15,000£ (gain) – 3,000£ (allowance) = 12,000£ (taxable gain).
As a higher-rate taxpayer, you pay 20% CGT on cryptocurrencies:
20% of 12,000£ = 2,400£.
- So, you owe 2,400£ in Capital Gains Tax on your Bitcoin sales.
- Income tax rates in the UK are decided on the basis of your residency status and the amount of income earned as applied to cryptocurrencies.
- The income range of up to 12,570£ for Personal Allowance is 0%, for Basic rate is 20% for 12,571£ to 50,270£, for Higher rate is 40% for 50,271£ to 125,139£, and for Additional Rate of over 125,140£ is 45%.
- For instance, if you’re a freelancer with a total annual income of 40,000£ realized from Bitcoin projects. You fall within the basic rate as a tax payer and pay 20% tax on your Bitcoin earnings, which equals 8,000£. Deduct the tax-free allowance (3,000£) to finally make your payable tax to stand at 5,000£.
Related:
- Crypto Tax Calculator For Canada
- Cryptocurrency Tax Calculator Australia
- India Cryptocurrency Tax Calculator
- NFT Tax Calculator
- US Cryptocurrency Tax Calculator
- UK Crypto Tax Calculator
Conclusion
To many people, taxes on crypto come as quite a shock which brings about issues of getting to know how each crypto is taxed or finding an expert who handles crypto tax!