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Many of our clients and people in our network have been asking us about cryptocurrency lately. Whilst we don’t provide investment advice, we can offer useful guidance about how cryptocurrency works in terms of tax. Below is a quick guide to what cryptocurrency is and how to achieve tax efficiency

What is cryptocurrency? 

Cryptocurrency is a completely digital currency that comes in multiple forms, with the most well-known being Bitcoin, Ethereum, Tether and many more. Cryptocurrency is a form of stored value that’s independent from governments and central agencies such as banks and companies. Due to its highly fluctuating market, cryptocurrency has become a popular form of investment but also comes with risks. 

Cryptocurrency and CGT 

Capital Gains Tax is the tax you pay on the profit earned on an asset when selling or disposing of it. Usually, selling cryptocurrency and making a profit means that you will have to pay Capital Gains Tax. For further information about Capital Gains Tax and how it could affect your assets, get in touch with our tax experts today. 

Is tax only applied when selling crypto? 

Selling crypto for a profit isn’t the only time when tax may be applied. A gain can also occur when one type of cryptocurrency is exchanged for another format, such as swapping Bitcoin for Ethereum. It can get pretty complex, which is why we’re here to advise on your tax obligations whenever the occasion arises. 

Cryptoassets and income tax 

Other forms of tax apply to cryptocurrency when it is used as remuneration. For instance, if an employer were to pay an employee in cryptoassets, income tax and national insurance will become due. 

Crypto trading 

As with all areas of tax, you have to be in the know or consult a tax specialist when carrying out specific financial activity. For example, if HMRC were to deem your activities as trade rather than investing, income tax will be charged similar to any other form of income. We’re here to keep you on the same page as HMRC and make sure that you never receive a fine for inadvertently failing to pay any tax that’s due. 

Cryptocurrency and inheritance tax 

Due to cryptoassets being in the same asset class as property for inheritance tax purposes, you should plan your tax wisely to ensure that your estate remains compliant and tax efficient both now and in the future. 

Tax advice and family wealth management 

As mentioned above, cryptocurrency can be a complex activity and attention to detail is crucial. In order to protect your assets and ensure that you’re paying tax where required, get in touch with our tax specialists today. 
 
To find out more, call our Yorkshire office on 01482 235575, our London office on 0207 885 0605, or fill in the contact form below. 
 
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