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How to File Your HMRC Crypto Tax Returns: A Guide for UK Investors

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Lorena Nessi
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Key Takeaways

  • The filing deadline for online submissions for self-assessment tax returns in the UK is January 31st.
  • Capital Gains Tax (CGT) applies to taxable gains from selling, swapping, or using crypto for goods or services, with losses available to offset future gains. 
  • Income Tax applies to earnings from mining, staking, yield farming, airdrops for services, DeFi interest, and NFT sales or royalties. 
  • Maintaining accurate records ensures compliance with HMRC rules.

In the UK, the 31st January crypto tax deadline is looming, making it crucial for investors to submit accurate crypto tax returns and avoid penalties. 

While many regions are still developing cryptocurrency regulations, the UK crypto tax reporting must follow clear HMRC guidelines  to ensure compliance.

Key steps include understanding how HMRC taxes crypto, filing correctly, avoiding common errors, and keeping thorough transaction records. 

This UK cryptocurrency tax guide provides general insights to help users meet these requirements. However, individuals should always refer to official documents like HMRC Cryptoassets Manual , especially in case of doubt or complex cases.

How Crypto Is Taxed by HMRC

According to HMRC, filing crypto taxes involves a series of steps and rules. HMRC treats cryptocurrency as a digital asset, with tax rules determined by the nature of the activity. Regarding UK tax crypto transactions, there are two primary tax categories: Capital Gains Tax (CGT) and Income Tax.

Capital Gains Tax (CGT)

  • Buying and holding: HMRC does not tax cryptocurrency held until it is disposed of through a sale, trade, or other taxable event.
  • Selling cryptocurrency for fiat: CGT applies to gains calculated as the difference between the sale price and acquisition cost.
  • Crypto trading: HMRC treats gains from crypto swaps as disposals. The gain is calculated by comparing the market value of the cryptocurrency received to the acquisition cost of the cryptocurrency given up.
  • Airdrop disposals: Airdrop disposals fall under CGT when individuals sell or trade them. If airdrops result from personal activities, CGT applies upon disposal. If individuals receive them for services or business activities, they are subject to Income Tax at the time of receipt and CGT upon disposal.
  • DeFi withdrawals: Gains from withdrawing liquidity in decentralized finance (DeFi) platforms are subject to CGT.
  • NFT sales: Generally, CGT applies to gains from non-fungible tokens (NFT) sales.

Income Tax

  • Mining rewards: HMRC taxes mining rewards as income. Individuals can deduct allowable expenses such as electricity used for mining or hardware depreciation.
  • Staking and yield farming: Rewards from staking and yield farming are taxed as income when available.
  • Airdrops: HMRC taxes airdrops received for services, promotions, or activities as income.
  • DeFi income: Trading fees earned from DeFi liquidity pools and interest earned through DeFi lending are taxed as income.
  • NFT royalties: Creators normally have to pay income tax on proceeds from primary sales and royalties they earn from secondary market transactions.

How Do HMRC Crypto Tax Laws Apply Capital Gains Tax to Profits?

HMRC crypto tax laws apply CGT to profits with the following rules:

  • Gain calculation: Individuals calculate the gain by subtracting the acquisition cost, including allowable expenses, from the disposal value.
  • Allowable costs: HMRC recognizes transaction fees, broker commissions, and exchange fees tied to purchases and sales as allowable expenses. 
  • Losses claims: Individuals have four years from the end of the tax year to claim losses on income or capital gains. If the claim is not made through a tax return, users must submit it in writing to HMRC. 
  • Pooling rules: HMRC uses pooling to calculate the average cost of multiple purchases of the same cryptocurrency. This approach combines the total acquisition costs and divides them by the total units held, creating a single average cost per unit for tax calculations.
  • Capital gains allowance: It is important to note that there are some changes in the allowance. 

HMRC Crypto Tax Submission

The allowance for the 2023/24 tax year (April 6, 2023, to April 5, 2024) is £6,000. Investors must submit tax returns for this period by January 31, 2025. 

However, For the 2024/25 tax year (April 6, 2024, to April 5, 2025), the allowance drops to £3,000. The deadline for submitting returns is January 31, 2026.

Examples of CGT Application

These examples illustrate how to calculate taxable gains based on HMRC’s rules and allowances.

  • 2023/24 Tax Year Example:
    An individual buying Bitcoin for £20,000 and selling it for £30,000 realizes a gain of £10,000. After deducting £100 in transaction fees and applying the £6,000 capital gains allowance, CGT applies to the remaining £3,900 (£10,000 – £100 – £6,000).

How Do HMRC Crypto Tax Laws Apply Income Tax to Profits?

Income Tax applies to cryptocurrency earnings from mining, staking, yield farming, and other payments. Therefore, individuals should know how to report crypto earnings in detail and consider the following:

  • Timing of income recognition: Tax applies when individuals receive rewards or when the rewards become available.
  • Valuation of rewards: The GBP value at receipt determines the taxable amount.

Example of Income Tax Application

If staking rewards total £500, the full amount is taxed. For a basic rate taxpayer at 20%, this results in £100 in tax. It is important to remember that there are different taxpayer percentages. 

Additional Considerations

There are a couple of other elements that individuals should consider before submitting their tax return: 

Using Cryptocurrency for Goods or Services

HMRC treats this as a disposal, making gains from these transactions taxable under CGT rules. 

For example, if an individual uses Bitcoin (BTC) to purchase a laptop, HMRC treats this as a disposal of the Bitcoin. Individuals should calculate any gain as the difference between the Bitcoin’s value at the time of disposal (the price of the laptop in GBP) and its acquisition cost. This gain is taxable under CGT rules.

Bed and Breakfasting Rules

HMRC’s same-day and 30-day rules prevent individuals from using a previously common tax management strategy known as “bed and breakfasting.” 

This strategy involved selling an asset, such as cryptocurrency, to realize a loss or gain for tax purposes and then quickly repurchasing the same asset to maintain the investment.

Under the current rules, HMRC matches the repurchase of the same asset within 30 days of the disposal. This prevents individuals from benefiting from artificial losses or gains. 

These rules aim to close loopholes and ensure that tax calculations accurately reflect true economic activity.

Step-By-Step Guide To Filing Your UK Crypto Tax Return

Filing an HMRC crypto tax return process involves careful preparation and accurate documentation. This guide outlines  how to report crypto earnings:

Accurate Record-Keeping

Good record-keeping supports compliance with HMRC regulations and ensures accurate tax reporting. Recommended records include:

  • Transaction dates: Record the acquisition and disposal dates for all cryptocurrency transactions.
  • Transaction values in GBP: Include the GBP value at the time of acquisition and disposal to calculate gains and income.
  • Transaction types: Specify the nature of each transaction, such as buying, selling, trading, mining, staking, or receiving payments.
  • Crypto assets involved: Document the names (e.g., BTC, ETH) and amounts of cryptocurrency transacted.
  • Transaction fees: Record exchange and network fees that impact gain calculations.
  • Wallet addresses: Track asset movements by recording the sending and receiving wallet addresses.
  • Supporting documents: Retain relevant materials such as exchange statements, wallet exports, and receipts.

Detailed records simplify the tax filing process, reduce the risk of errors, and help determine whether filing is necessary.

Determining Filing Requirements

HMRC requires individuals to report crypto activity if capital gains exceed the annual allowance (£6,000 for 2023/24, £3,000 for 2024/25) or if income is earned through mining, staking, or airdrops for services. Keeping records is a good practice even if gains are within the allowance or filing is not required.

Filing Crypto Taxes with HMRC

Once the need to file is confirmed, the following steps apply:

  • Tax calculations: Individuals calculate taxable gains by subtracting acquisition costs and allowable expenses from disposal values. Applying pooling rules helps average the cost of multiple purchases while considering same-day and 30-day matching rules for frequent trades. Using the GBP value at receipt allows individuals to calculate income and deduct applicable expenses, such as electricity costs for mining.
  • Using tax tools: HMRC’s capital gains calculator or third-party crypto tax software supports accurate calculations. Ensure all tools align with HMRC guidelines and verify calculations independently.
  • Filing forms: Complete the SA100  form for self-assessment and include the SA108  (Capital Gains Summary) to report gains. Additional supplementary pages may be required for other income.
  • Submission deadlines: Submit tax returns online by January 31st following the end of the tax year. For the 2023/24 tax year, the deadline is January 31, 2025. Paper returns must be submitted by October 31, 2024.
  • Tax payment: Pay taxes by the same deadline to avoid penalties. HMRC accepts payment via bank transfer, Direct Debit, or card.
Example of a SA100 form | HMRC
Example of an SA100 form | HMRC

Thus, cryptocurrency tax tips for UK investors include maintaining accurate records, calculating tax correctly, and adhering to deadlines ensures compliance and avoids penalties.

Common Mistakes to Avoid

Filing crypto taxes can be complex, and certain mistakes frequently occur. Understanding these errors helps individuals ensure compliance and avoid penalties.

  • Failing to report all transactions: HMRC requires individuals to report every taxable transaction, including swaps and payments.
  • Incorrect cost basis calculations: Misapplying pooling rules or omitting transaction fees can lead to errors.
  • Missing deadlines: Late submissions incur penalties. Ensure all filings and payments meet HMRC deadlines.
  • Ignoring income from rewards: Mining, staking, and airdrop rewards count as taxable income and must be reported.

How to Track Your Crypto Transactions

Tracking all crypto activity is essential for accurate reporting. Using reliable tools and methods ensures compliance and reduces the risk of errors.

  • Crypto tax software: Platforms like CoinTracker and Koinly help consolidate transaction data and calculate gains.
  • Exchange records: Download transaction histories directly from crypto exchanges.
  • Wallet exports: Use wallet software to access detailed transaction data, including timestamps and amounts.
  • Manual logs: Keep detailed records of transactions, including dates, amounts, GBP values, and associated fees.

Effective tracking simplifies tax filing and ensures accuracy.

Conclusion

Filing crypto taxes in the UK requires accurate record-keeping, understanding HMRC rules, and timely submissions. 

By calculating gains and income correctly, using reliable tools, and adhering to deadlines, individuals can ensure compliance and avoid penalties. 

This guide offers actionable steps to navigate the process confidently.

FAQs

What happens if I miss the 31st January crypto tax deadline?

The self-assessment filing deadline of January 31st results in an initial penalty of £100. Further penalties might apply for delays of 3, 6, and 12 months, and interest accrues on any unpaid tax. The deadline for paper Self-Assessment returns is earlier (usually October 31st).

Can I use a tax calculator to file my crypto returns with HMRC?

HMRC’s capital gains calculator and third-party crypto tax software assist with calculations. These tools do not file returns and require individuals to verify data accuracy and compliance with HMRC rules. Using these tools as support while understanding tax rules or consulting a professional advisor is good practice.

Do I need to report small crypto trades to HMRC?

All taxable disposals, including sales, trades, exchanges, and using cryptocurrency for goods or services, must be recorded and may require reporting.

If total taxable gains for the tax year fall within the annual Capital Gains Allowance, no CGT will be owed. However, reporting gains and losses on the self-assessment tax return is a good practice. Reporting losses ensures they can be offset against future gains.



What documentation should I keep for HMRC crypto tax reporting?

Individuals must maintain detailed records of all cryptocurrency transactions. These records should include transaction dates, GBP values at the time of acquisition and disposal (crucial for CGT calculations), transaction types such as buying, selling, trading, mining, or staking, and the names and amounts of crypto assets.

Records must also capture transaction fees, including network or gas fees, wallet addresses for sending and receiving and supporting documents such as exchange statements, wallet exports, or blockchain explorer screenshots.



Disclaimer: The information provided in this article is for informational purposes only. It is not intended to be, nor should it be construed as, financial advice. We do not make any warranties regarding the completeness, reliability, or accuracy of this information. All investments involve risk, and past performance does not guarantee future results. We recommend consulting a financial advisor before making any investment decisions.
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Lorena Nessi

Lorena Nessi is an award-winning journalist and media and technology expert. She is based in Oxfordshire, UK, and holds a PhD in Communication, Sociology, and Digital Cultures, as well as a Master’s degree in Globalization, Identity, and Technology. Lorena has lectured at prestigious institutions, including Fairleigh Dickinson University, Nottingham Trent University, and the University of Oxford. Her journalism career includes working for the BBC in London and producing television content in Mexico and Japan. She has published extensively on digital cultures, social media, technology, and capitalism. Lorena is interested in exploring how digital innovation impacts cultural and social dynamics and has a keen interest in blockchain technology. In her free time, Lorena enjoys science fiction books and films, board games, and thrilling adventures that get her heart racing. A perfect day for her includes a spa session and a good family meal.
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