Cryptocurrency and Digital Asset Tax Advice Accountants

According to a recent survey by HM Revenue and Customs, 10% of UK adults said they hold or have held cryptoassets. Cryptocurrencies are becoming an increasingly popular part of an investment portfolio for individuals. Despite this, the tax implications are not commonly known and it is always important to have an understanding of such matters before making any investments.

HMRC: Cryptoassets Manual

If you have invested in  any type of cryptocurrency/cryptoasset and require an experienced tax advisor, Rawlinson Pryde can help you.

Unlike other crypto accountants, Rawlinson Pryde provides expert crypto accountancy knowledge.  we have been servicing clients since 2017, making us one of the first firms to asset cryptoasset clients. Many of the team are investors which means you do not need to explain the basics of cryptocurrency to us. Whatever your level of understanding of cryptocurrency and decentralised finance, we’re on hand to help. So, if you’re unsure of the tax obligations on your latest cryptocurrency profits, we’ll take care of it for you.

To get in touch please call us on 01234 300 500 or complete the enquiry form and send to [email protected]

 

Compliance

To ensure individuals and businesses are paying the right amount of tax at the right time, HMRC are conducting a number of compliance checks on cryptocurrency investors. HMRC obtains third party information and checks this against their records. Where there is a discrepancy, HMRC may issue a nudge letter to prompt you to file or correct your tax return. You should seek tax advice to ensure you are aware of your obligations.

Please refer to our record keeping article.

We are able to offer fee protection services, which provide peace of mind by covering our fees in the event of an HMRC enquiry. If you would like more information about this optional service, please let us know. We will provide you with the policy details and exclusions to review.

FAQs

How are digital assets taxed?

Currently, there is no specific crypto tax legislation and we are having to make do with existing legislation. Actions such as trading, lending, borrowing, and staking may give rise to capital gains or income tax. Given that there are a variety of digital assets that work in different ways, you may require specific knowledge of a project to understand the tax implications.

When do you become liable to capital gains tax?

This is the most common question we get asked from individuals we speak to. Many believe that capital gains tax is only due when they sell crypto for fiat. In fact, any time one asset is exchanged for another a capital gain or loss may arise. Furthermore, a gain/loss may arise if you pay for goods or services with crypto.  You need to ensure you keep records of every transaction.

When do I need to report capital gains tax?

If your trading activity falls within the scope of Capital Gains Tax, then it has to be reported to HMRC if either of the below apply:

  • Your gains are above the Capital Gains Annual Exemption,
  • Your total proceeds (sum of all disposal values) are higher than 4 x the Capital Gains Annual Exemption, and you already submit a Self-Assessment Tax Return.
 
 

When do you become liable to income tax?

If you stake or lend your tokens, you may receive rewards in return. The market value of the rewards at the time of receipt will be subject to income tax. If the activity is not a trade, the income in the tax return should be shown as miscellaneous income. Any expenses incurred earning rewards may be deducted from the income figure.

Please refer to our Staking rewards article.

Does HMRC consider buying and selling digital assets to be a trade?

HMRC are constantly updating their cryptoasset guidance and we are keeping a close eye on any developments. There are some circumstances where HMRC may consider your activities to be a trade rather than investing; therefore we recommend that you seek professional advice.

I have been airdropped, how is this taxed?

If you have unexpectedly been airdropped cryptocurrency directly into your wallet, this is not usually subject to income tax. On the other hand, if you undertook actions to earn this airdrop, it may be subject to income tax rules. It may be necessary to understand a little about the project/company that issued the tokens to decide how or if they would be taxed.

 

Client Testimonial

After my first year of investing in cryptocurrencies I found myself in a bit of a mess. I had a bunch of exchange exports and screenshots from ico’s and wondering how I’d manage to work out what I owed in tax. I didn’t have much luck with the online tools, attempting to contact local accountants usually gave the “what are cryptocurrencies?” response.

Thankfully I came across Rawlinson Pryde, and after emailing them for advice I was contacted by them. They were really helpful in explaining exactly what I owe.

They advised the format which would make it the cheapest for me, but also gave me the option of giving them the raw files to sort it all out, which was worth the extra considering the mess I had to sort. Was a relief just to be able to send them everything i had and have an expert making sure it was done correctly. I found them to be professional throughout, quick to respond, even out of office hours, and generally made sure I understood everything despite being completely clueless when it came to anything tax related. They even sent off my tax return on my behalf, so all I have to do now is pay the bill.

Highly recommend and will definitely be using again.

Client Testimonial

This was my first experience of having to pay capital gains with the extra complexity of crypto currency gains. After getting bad advice from a local accountant, Rawlinson Pryde helped me through this period of high anxiety with a cool head and very understanding nature. Look no further for an accountant that actually knows what they are doing with crypto gains (or losses!) and sleep easy at night knowing you’re doing the right thing.