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The UK government has imposed strict regulations due to the exponential growth of cryptocurrency and investments. Investors are required to report their crypto gains and losses to HMRC in 2025. This guide provides a deep insight for traders and investors who are confused by the regulatory changes imposed recently.
Key Takeaways
- New Regulations: In 2024, HMRC updated its tax policies and introduced stricter regulations to ensure transparency in all cryptocurrency activities.
- Deadline: The self-assessment tax returns must be submitted by 31 January 2025, or else you will be subject to penalties under SA108 and SA100., while the deadline for filing paper tax remains on 31 October 2024.
- Asset Tracking: HMRC advises keeping track of all crypto transactions accounting for both gains and losses.
Cryptocurrency is not considered a legal tender or a form of currency in many countries including the UK. They were largely treated as assets, which means, profits generated with the buying, selling, trading, or staking of cryptocurrency are subject to tax obligations. With new regulations, HMRC (HM Revenue and Customs) ensures whether individuals are reporting their income generated through crypto gains such as selling, exchanging, trading, or spending for goods and services. If you are anyhow related to the crypto industry, it is essential that you understand who should pay tax, how to pay tax, and how to calculate it. Here are some tax implications that you must know:
- Capital Gains Tax (CGT)
You may be required to pay capital gains tax if you have made profits from selling or exchanging any cryptocurrencies. However, if your gains are less than 6,000 euros (FY: 2024-25), are considered tax-free.
- Income Tax
If you earn crypto as a source of income, you should file your taxes. (Acquiring cryptocurrencies through staking, mining, and airdrops is considered a source of income.)
- VAT (Value Added Tax)
Buying and selling cryptocurrencies are exempted from VAT
However, gains below 6000 euros (for 2024-25) and exchanges in the form of gifts are tax-exempted.
What Are The Taxable Activities?
According to the new regulations of HMRC, it considers the transactions mentioned below as taxable:
Buying And Selling Crypto
If you buy cryptocurrencies such as Bitcoin or Ethereum and sell them later for profit, you may have to pay CGT. Profits and losses generated from selling crypto, swapping them with one another, or exchanging them are considered taxable events and are subject to CGT. However, it is calculated by deducting the buying and selling price (plus any transaction fees).
Crypto Exchanges
Crypto-to-crypto exchanges like exchanging Bitcoin for Ethereum, are taxable under UK tax guidelines. Apart from this, converting crypto into fiat currency is also taxable.
Staking And Mining
Staking and mining cryptocurrencies are considered a source of regular income and are taxable under HMRC guidelines. Rewards earned from mining and staking increase the value of your asset and are subject to income tax.
Income From Airdrops
If airdrops are received in exchange for a service or promotion, it is taxable. Participating in airdrop or receiving tokens as rewards of promotions must be reported. This is not applicable if they are received passively.
It is equally important to understand the tax-free events before filing your returns. Buying and holding cryptocurrency in your wallets and transferring it between your wallets is not considered taxable. Moreover, you need not pay any CGT while receiving cryptocurrency as a gift or if you donate it to your partner or spouse. You should keep track of the details of all these transactions along with their value at the time of disposal.
Explore More: Impact Of Government Regulations On Crypto Prices
How To Report Crypto To HMRC?
To complete cryptocurrency transactions, users should register for Self-Assessment. The steps are discussed in detail below:
Register For Self Assessment
Visit the online portal, HMRC self-assessment registration page to register. Registered users should choose themselves as self-employed individuals if crypto is part of their business or register as a user for most tax-paying individuals. Users who have already registered can sign in. After registration, HMRC will send a Unique Tax Reference (UTR) for filing tax returns.
Complete The Capital Gains Summary
To file tax returns for cryptocurrency, users should sign in and fill out the SA108 form as the initial step of Self Assessment. This can be used to report any profit incurred from the buying and selling of cryptocurrencies, or exchanging them. SA108 form can be used to report any Capital Gains Taxes.
Report Your Income
Income generated from mining, staking, and other activities such as active airdrops should be reported in the additional income section of the SA108 form. Users can locate “Other Income” and enter the total value of their annual earnings.
Submit Returns Before The Deadline.
The deadline for submission of Self-assessment tax return is 31st January 2025. All users should file their returns, and taxes must be paid by this date. Users must review all details entered and pay before the deadline to avoid penalties.
HMRC advises its tax-paying community to keep track of all transactions:
- By recording the dates of each transaction
- The amount of asset incurred via buying, selling, mining, or staking.
- The value of the cryptocurrency at the time of transactions
- Additional fees are charged during transactions such as platform fees and transaction charges.
Can You Save Crypto Tax In The UK?
Understanding the nuances of tax filing helps traders to legally reduce the amount of tax to be paid.
- Make Use Of Allowances: limit your gains below 6000 euros, if possible to legally avoid the paying tax. Capital gains below the threshold of 6000 euros are considered nontaxable. Additionally, if your gains are likely to exceed the limit, wait until next year to sell the additional assets.
- Use Loss Against Gains: you can deduct losses made from the total gains to limit the value of your gains.
- Gift To Family Members: introduce strategies like spousal transfer or gifts to get an exemption or reduce liability.
- Consult A Professional: a professional can identify and suggest guidelines that best fit your strategies without violating the HMRC laws.
Conclusion
HMRC has released the deadline for filing your tax return without penalties as 31 January 2026. It is essential for users to report every taxable transaction stated in the UK tax laws. Users should keep track of all transactions and other activities such as buying, selling, stalking, and mining. To start with, users should register on the HMRC official website and report their detailed records of all transactions in the SA108 form to report income generated through mining, stalking, buying, and selling.
Users can leverage allowances by understanding the laws and regulations to reduce liability. Seeking professional advice can be considered if you constantly generate profit exceeding the limit or if your situation is complex. However, it is important to understand and stay updated on the official guidelines provided by HMRC to place yourself as a responsible taxpayer.
