HMRC and your Cryptoasset capital gains tax position

Melanie Richardson


HMRC has written to UK holders of cryptoassets which is being seen as a clear reminder for holders to ensure they are aware of their tax obligations and are disclosing necessary information to HMRC.

The letter states that disposals of cryptoassets include:

  • Selling them for sterling or other ‘fiat’ currencies;
  • Using them to purchase goods and services;
  • Gifting them;
  • Exchanging them for other cryptoassets.

There is no specific Bitcoin tax or cryptocurrency tax in the UK.  Instead, your cryptoassets will either be subject to capital gains tax or income tax. If you have engaged in any of the activities above you may be liable for capital gains tax. If you are earning cryptoassets through activities such as mining you may be liable to declare this as income tax.

Record keeping

A key point to remember is that record keeping is essential.  Cryptoasset exchanges may only keep records of transactions for a short period, or the exchange may no longer be in existence when an individual completes a tax return.

The onus is therefore on the individual to keep their own records for each cryptoasset transaction.

Records of cryptoassets can be:

  • paper (cold) wallets containing the individual’s public and private keys
  • electronic (hot) wallets on devices
  • other records of their transactions and balances such as downloads of their wallet activity from a cryptoassets exchange
  • hardware (cold) wallets looking like a USB, containing the individual’s public and private keys.

Cryptoassets are digital assets and as such all records in a wallet should show balances and transactions, either in full or via reference to a public blockchain. The individual’s access to fiat currency could come from:

  • the point of deposits into a bank account; and
  • use of a cryptoasset Automated Teller Machine (ATM)

These are records which should also be kept and produced for an enquiry. They form part of the audit trail from acquisition to disposal and therefore evidence of any gains made.

Cryptoassets and inheritance tax

Cryptoassets form part of the holder’s estate for inheritance tax purposes and therefore if their value, and the value of other assets, exceed the nil rate band, they will be liable to inheritance tax on the holder’s death.

Cryptoasset tax legislation is in constant flux, for up to date information on how HMRC are treating crypto asset please see the cryptoasset manual link

Have you received a letter and have questions about your position? Do get in touch with your Swindells’ partner who will be able to advise you further.

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