Do you pay tax on crypto gains in the UK?

What is tax?

To have a clear insight into what this article is about, you first have to understand the meaning of tax. Tax is a mandatory contribution imposed on individuals or corporations by a government entity, and these contributions are used to finance government activities. The government does not regulate the crypto space in the UK, so how is a crypto investor obliged to pay taxes? This is a common question on the internet.

Crypto is generally not considered by the government as a form of money. Cryptocurrency is, in fact, a digital currency that came to light around 2008/2009. There was little or no regard for it then, as people considered it as an avenue for internet crimes. Currently, the crypto market has been known to generate millions of pounds and is sure to create awareness. Bitcoin is the cryptocurrency that made the crypto space as famous as it is now. Bitcoin is the largest cryptocurrency, with a price of about $30,000.

Do you pay tax on crypto gains in the UK?

The answer to this question is yes, but it depends on how the crypto assets are used. The regulations guiding the crypto space are still firm as cryptocurrency is not a generally accepted form of money, but that doesn’t stop a crypto investor from paying taxes in the UK.

According to the UK tax law, you are eligible to pay tax as long as you earn up to £12,300. However, transactions done in the crypto space are mostly untraceable, so how can the government tell If your profit is up to £12,300.

Without the crypto space being regulated, as long as you make up to the approved amount for paying tax, you are liable to pay capital gains tax, but without any close monitoring from a government body, most people flaunt this tax law.

By law, as long as you fall into any of these categories, you are liable to pay crypto tax gains.

• If your employer pays your salary with cryptocurrency: Though transactions done with cryptocurrency cannot be traced, as long as the company you work for is registered, you must record payments made to you. This makes it easier for the government to be aware of your cryptocurrency activity. • If your business is backed by cryptocurrency: This also applies to cryptocurrency companies based in the UK. If your registered business is connected to cryptocurrency, you are liable to pay tax. • If you mine crypto: crypto mining, especially Bitcoin, requires a high energy level. If you are a crypto miner, you are eligible to pay tax. • If you trade crypto: if you trade crypto in the UK and make good profits, you should pay tax.

Some companies or individuals backed by cryptocurrency often hide under the fact that the crypto space isn’t regulated, but the thing is, the law always finds its way around things, and they are also likely to fall out of luck in the future.

The question is, Do you pay tax on crypto gains UK?

It is a well-expected question considering the unregulated nature of crypto and the fact that most people see crypto investment as gambling since it is an unpredictable space. However, unlike what some individuals or corporations may assume, HMRC does not classify cryptocurrency as gambling. Therefore, as long as there is profit, paying tax is required.

What Are the tax rates?

Tax rates depend on the type of assets and are not permanent. The rates can change each year, so to avoid defaulting in any way, monitor the rates at all times.

• For shares, you are required to pay a basic rate of 10% • Residential properties require a basic rate of 18% • Cryptocurrency requires a basic rate of 10%

Conclusion

Paying tax to the government if you make a profit is highly mandatory. So whether the crypto space is regulated or not, taxes must be paid. Though the crypto space is volatile and maybe seem like gambling, it does not exempt a crypto trader from paying taxes in the UK.