UK Tax Collector Says How Crypto Holders Will Pay Taxes

UK Tax Collector Says How Crypto Holders Will Pay Taxes

“But in this world nothing can be said to be certain, except death and taxes,” said Benjamin Franklin in a letter to Jean-Baptiste Leroy, 1789. Well, The United Kingdom has just made crypto holders to remember that.

No matter how unanimous are crypto investors, they are going to pay taxes. At least, it is what the Her Majesty’s Revenue and Customs (HMRC) agency said this week as they published guidance on how crypto holders will pay taxes.

In a report published Wednesday, the HMRC explained how individuals possessing crypto assets would be taxed, not corporations. The government agency said it would release another guidance on a later date talking about taxation on tokens held by companies.

“Cryptoassets for individuals,” a policy paper published 19 December, covers all kind of tokens in possession of individuals. However, the tax treatment depends on the nature and use of tokens, but not the definition of the token.

“HMRC does not consider cryptoassets to be currency or money,” says the paper. “This reflects the position previously set out by the Cryptoasset Taskforce report (CATF). The CATF have identified three types of cryptoassets: exchange tokens, utility tokens, and security tokens.”

The agency taxes cryptos based on what people do with it. As a sample, “If the holder is conducting a trade then Income Tax will be applied to their trading profits.” Also, depending on frequency, organisation and sophistication.

“A trade in cryptoassets would be similar in nature to a trade in shares, securities and other financial products,” the HMRC said.

Mining will also be taxable regarding the degree of activity, organisation, risk, and commerciality. “The pound sterling value of any cryptoassets awarded for successful mining will be taxable as income with any appropriate expenses reducing the amount chargeable.”

Also, if individuals decide to keep the crypto awarded from Mining, they will have to pay capital gains tax when they later dispose of them. All fees or rewards received in return for mining are taxable.

Blockchain Forks and Losses

The HMRC also covers hard and soft forks. “A soft fork updates the protocol and is intended to be adopted by all. No new tokens, or blockchain, are expected to be created,” the agency highlights.

“A hard fork is different and can result in new tokens coming into existence. Before the fork occurs there is a single blockchain. Usually, at the point of the hard fork a second branch (and therefore a new cryptoasset) is created,” HMRC explains.

As for taxation matters, the value of the new crypto asset created in the fork will be derived from the original crypto that was held by the investor. Costs must be split.

Regarding losses, “if an individual disposes of cryptoassets for less than their allowable costs, they will have a loss. Certain ‘allowable losses’ can be used to reduce the overall gain, but the losses must be reported to HMRC first.”

Losses will be possibly accepted if investors claim that their crypto assets have “negligible value.”

The United Kingdom Cryptocurrency Task Force

United Kingdom special agents are not only James Bond or Austin Powers, but also Tax collector officers.

Previously this year, the United Kingdom Chancellor of the Exchequer Philip Hammond launched the “Crypto Assets task force” in an effort to promote blockchain and crypto market but also to fight against tax evasion from crypto holders.

The Crypto assets task force will include the Bank of England, the UK Treasury, and the Financial Conduct Authority.

Back in the year, Hammond affirmed that the task force “will help the United Kingdom to manage the risks around Cryptoassets, as well as harnessing the potential benefits of the underlying technology.”

Ready to join our tribe?

We respect your email privacy

Subscribe now to recieve exclusive updates and offers!

Recently Similar News

Latest Guides

Latest News

ChangeNOW,Decentralised,Fraud

ChangeNOW’s AML Action Lead To The Return Of $15M COMP

Earlier this week, ChangeNOW announced that it was able to identify and return 45,505 COMP back to Compound. The estimated value of this recovery is around the $15m mark. This remarkable achievement is further proof of the effectiveness of the exchange’s Anti-Money Laundering (AML) procedures. In an announcement made on ChangeNOW’s website, the company provided […]

6 October, 2021
CFD Trading Platform,eToro,Trading

eToro Lowers The FTD Minimum Across Several Countries

eToro, the social trading and multi-asset platform, has decided to lower the minimum first time deposit, or FTD. Until further updates, users who sign up today using the link below will be able to fund their trading account with as little as $50. This offer is only valid to users in selected countries. To participate […]

24 September, 2021
ChangeNOW,Cryptocurrency,Investment

ChangeNOW Launches The NOW Tracker App

The young, but fast-growing online cryptocurrency exchange, ChangeNOW, has just announced the release of its latest product. The NOW Tracker is a free asset management app that lets users keep track of their coins and tokens across different wallets. Available on Google Play and the App Store, NOW Tracker is flexible and functional. This solution […]

9 September, 2021
eToro,Investment,Trading

eToro Becomes An Official Partner Of RB Leipzig

The world’s leading social investment network, eToro, has recently announced a new and exciting partnership. According to an announcement on eToro’s Twitter page, the company has become the latest partner of the German football team, RB Leipzig. A two-year partnership agreement has been signed between the parties. Running until 2023, this agreement can be extended […]

24 August, 2021
Binance,Bitcoin,token

PSG’s Messi To Receive Part Of His Salary In Cryptocurrency

The Argentinian footballer, Lionel Messi, has made headline news several times in the past few weeks. Following his surprise departure from FC Barcelona, the player confirmed that he will be joining Paris Saint-Germain FC. The move was significantly newsworthy but got even more interest when it was announced that part of the footballer’s salary will […]

23 August, 2021
Blockchain,Casino,Ethereum

KingTiger Casino Announces Shut Down

KingTiger Casino has announced that it has ceased all operations until further notice. According to its website, the casino has had to “temporarily close” due to Ethereum network congestion. It is not yet clear if and when this online Bitcoin casino will reopen. Meanwhile, we invite you to check out other Bitcoin casinos from our […]

12 August, 2021
Binance,Casino,Cryptocurrency

CryptoCasino Announces Temporary Close

CryptoCasino has stopped operating until further notice. According to a landing page on their website, the casino is undergoing an update. There is no information about when the casino will reopen or the reason why an update required the website to shut down temporarily. Players who hold a crypto wallet account with CryptoCasino need not […]

11 August, 2021
Binance,Bitcoin,SEPA

Binance Suspends SEPA Inward Payments Until Further Notice

Binance Suspends SEPA Inward Payments Until Further Notice Binance has just announced that it has temporarily stopped all incoming SEPA payments. As a result, users will no longer be able to deposit euros using the primary European payments network. The world’s largest cryptocurrency exchange did not provide any specific information regarding the reason behind this […]

12 July, 2021