THINGS YOU SHOULD KNOW ABOUT CRYPTOCURRENCY IN THE UK
Cryptocurrency is a hot topic. Every investor in the world, even individuals, are talking about it. It is a digital currency that allows people to buy, trade and sell their products or services through digital platforms.
The UK government considers cryptoassets as property. It is estimated that nearly 2 million people in the UK own some type of cryptocurrency.
There has been a significant increase in the number of stores that accept cryptocurrencies. This encourages individuals to acquire them.
Cryptocurrency in the UK is subject to tax, even if there is an annual tax-free allowance, there is a limit to how much you can earn without being taxed.
Two types of taxes regarding cryptocurrencies in the UK
Capital Gains Tax:
Most investors who started investing in the cryptocurrency market must pay the Capital Gains Tax (CGT). This tax is fixed according to the difference between the price which the investor bought the cryptocurrency and the price for which they sold it.
However, the UK government can guarantee you a tax-free allowance if the amount you have earned investing in cryptocurrency doesn’t exceed £12,300. For an individual who made £30,000 trading a cryptocurrency, the HMRC (Her Majesty’s Revenue and Customs) will consider the remaining £17,700 to determine the amount of tax you will pay.
In some situations, HMRC considers that an investor’s gains are considered as income from Financial Trading.
The investor’s income then will be treated like employment income. In this case, the tax can reach up to 45% depending on the tax bracket according to the UK tax law. This only applies to the individual if his cryptocurrency income exceeds £12,570.
What should you do when you own cryptocurrency?
When you own a cryptocurrency, it is necessary to declare any gains you have made to the HMRC. If you skip this step, you will be subject to a penalty fee. This fee can also be applied if your declaration doesn’t respect the deadline.
The deadline for this year’s self-assessed tax return is the 31st of January 2022.