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.