Crypto Tax Regulations United Kingdom

UK Specific Crypto Tax Classifications 2021

UK Specific Crypto Tax Classifications, in general, are not that easy to understand and there are different regulations and exceptions. The worst part is that you have to do it once a year and forgot everything since the last time you filled your return.

When it comes to UK-specific crypto tax classifications , there’s not only the individual person that struggles with the regulations but also the government itself or even experienced CPAs.

The reason is that this space is growing so fast, allowing investors to use every single investment vehicle that they can find in the old banking world but in a decentralized way and sometimes even optimized compared to the old world.

As a consequence, the government can’t keep up and probably has never heard about decentralized liquidity pools or some other new cool features that are being developed in the crypto ecosystem.

We partnered up with local tax experts so that we can provide all the knowledge you need to be able to file your tax report by yourself. You should definitely read this article if you:

  • are interested in crypto taxation for the UK
  • need to report your crypto taxes in the UK
  • want to learn more about the specific classifications for the UK

Now let’s deep dive into all the classifications you can find in ACCOINTING.com so that you understand the consequences of the different Income and Disposal taxations.

Incoming transactions / deposit: Classifications and their consequences

The following UK-specific crypto tax classifications describe how deposits get treated in the Tax Report in terms of taxable or not taxable and how their cost basis gets calculated. You will find the statement for the Incoming transactions in the FullTaxReport.pdf and in the Fulldataset.xls export they are either summed up in the Taxable income table or the non-taxable income table depending on their classification.

The cost basis is defined by the type as well, if you acquired the asset in a trade (e.g. swap, buy, otc,…) Accointing defines the cost basis with the value of the sell side of this trade. If you received the asset as for example an Airdrop Accointing will define the cost basis based on the price the asset has at the receiving date.

The HMRC defines an Airdrop as a taxable income if you had to work for the airdrop. In case you just received the Airdrop without doing anything for it, it is handled as a non taxable income.

Classification type (incoming transaction)Taxable or not taxable?Definition of Cost basis
No classificationTaxable incomeValue of the receiving date.
Buy trade (incoming side)Not taxableProceeds of the sell side
OTC trade (incoming side)Not taxableProceeds of the sell side
ICO trade (incoming side)Not taxableProceeds of the sell side
HardforkTaxable incomeValue of the receiving date.
Airdrop (only taxable when you worked for it)Not taxableValue of the receiving date.
Mining (as a hobby)*Taxable incomeValue of the receiving date.
BountyTaxable incomeValue of the receiving date.
Masternode incomeTaxable incomeValue of the receiving date.
Staking IncomeTaxable incomeValue of the receiving date.
Received giftNot taxableValue of the receiving date.
Swap (DEX) (Incoming)Not taxableValue of the receiving date.(if there is an amount on the sell side, you can select it as OTC and use the proceeds from the sell side)
Income from gamblingTaxable incomeValue of the receiving date.
Add fundsNot taxableValue of the receiving date.
Income (for a service)Taxable incomeValue of the receiving date.
Liquidity pool incomeTaxable incomeValue of the receiving date.
ReconcileTaxable incomeValue of the receiving date.
Lending IncomeTaxable incomeValue of the receiving date.
Margin gainTaxable margin trade income (separate table in the report)Value of the receiving date.
Definition of the taxable or not taxable event created by deposit classifications

*if you do mining as a business you can offset costs (electricity, etc.) from the mining income. If you receive tokens from mining and are not trading, the tokens will be treated as other taxable income.

Withdraws or sell actions create disposals – those are either taxable or non-taxable depending on the classification of the outgoing transaction.

This is a really important section of the UK specific crypto tax classifications. There are countries where the incoming and outgoing transactions define as a combination if the transaction is seen as taxable or non-taxable.

In the UK it’s relatively easy, here it is only important how the asset got disposed (sold, withdrawn). You will find the different UK-specific crypto tax classifications types and consequences in the following table.

The margin losses and margin fees are all summed up together with the margin gains in the fulltaxreport.pdf and use the proceeds of the transaction date to define the gains. They don’t create taxable disposals, meaning when a tax lot gets closed because of a margin loss or fee it will create a non-taxable disposal in the export files.

Transactions fees of internal transactions (e.g. from your exchange to your wallet) will show up in the Full tax report pdf summed up in a separate table.

UK-specific crypto tax classifications

Classification type (outgoing transaction)Taxable or not taxable?Definition of Cost basisSummed up in
No classificationTaxable DisposalProceeds: Value at the date Cost basis: HMRC poolingTaxable disposal as capital gains in full tax report
Sell tradeTaxable DisposalProceeds: Value at the date Cost basis: HMRC poolingTaxable disposal as capital gains in full tax report
OTC trade (sell side)Taxable DisposalProceeds: Value at the date Cost basis: HMRC poolingTaxable disposal as capital gains in full tax report
ICO trade (sell side)Taxable DisposalProceeds: Value at the date Cost basis: HMRC poolingTaxable disposal as capital gains in full tax report
Swap (sell side)Taxable DisposalProceeds: Value at the date Cost basis: HMRC poolingTaxable disposal as capital gains in full tax report
Payment (outgoing transfer to someone else)Taxable DisposalProceeds: Value at the date Cost basis: HMRC poolingTaxable disposal as capital gains in full tax report
Used for gamblingTaxable DisposalProceeds: Value at the date Cost basis: HMRC poolingTaxable disposal as capital gains in full tax report
Gift sent*Taxable DisposalProceeds: Value at the date Cost basis: HMRC poolingNon taxable disposal in full tax report
Lost**Not taxable disposalProceeds: Value at the date Cost basis: HMRC poolingNon taxable disposal in full tax report
Remove fundsNot taxable disposalProceeds: Value at the date Cost basis: HMRC poolingNon taxable disposal in full tax report
ReconcileTaxable DisposalProceeds: Value at the date Cost basis: HMRC poolingTaxable disposal as capital gains in full tax report
FeeTaxable DisposalProceeds: Value at the date Cost basis: HMRC poolingTaxable disposal as capital gains in full tax report
Interest paidTaxable DisposalProceeds: Value at the date Cost basis: HMRC poolingTaxable disposal as capital gains in full tax report
Margin lossNo disposal tax, but proceeds summed up in margin tableProceeds: Value at the dateNon taxable disposal in Full tax report and taxable loss in Margin table
Margin feeNo disposal tax, but proceeds summed up in margin tableProceeds: Value at the dateNon taxable disposal in Full tax report and taxable loss in Margin table
Definition of the taxable or not taxable event created by withdraw classifications

* unless it’s a gift to your spouse or civil partner. If thats the case, classify it as “Remove funds”

** If the coin goes to 0, you can offset this loss but if you lose it / or it gets hacked you can’t easily claim a loss. You will have to argue with the HMRC if they accept this as a loss or not. It makes sense to talk to a tax expert for this.

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