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Cryptocurrency tax advice

With more and more people including cryptocurrency in their asset portfolios, it is essential to have a clear understanding of the tax position around crypto, particularly when it comes to estate planning matters. At Lodders we have specialist expertise in the taxation of cryptocurrency and can help you to ensure you understand your position and plan for the future.

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Primary contacts

Alana Graham is a Barrister with more than 27 years’ experience in taxation and tax planning.  To discuss taxation and cryptoassets, or any other tax-related query, please get in touch with Alana.



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Questions answered

Not sure that this is the service for you? Take a look at some of our frequently asked questions for more information.

Crypto assets are also known as cryptocurrency or tokens.

Cryptocurrency is a digital or virtual currency and uses cryptography to secure transaction.

Cryptocurrency can be transferred, stored or traded electronically.

Cryptocurrency is not physically, it is a completely digital form of currency.

There are many different types of cryptocurrency, bitcoin being the most well-known.

It is prudent to seek legal and financial advice when using or trading them.

The tax treatment of all types of tokens is dependent on the nature and use of the token and not the definition of the token.

HMRC does not consider cryptoassets to be currency or money.

On its own, owning and using cryptoassets is not illegal in the UK and does not imply tax evasion or any other illegal activities.

However, it is important to seek up-to-date legal and financial advice when dealing with these tokens, to ensure you are protected.

A derivative is a financial instrument where the performance is based on the movement of the price of the underlying asset.

A cryptoasset wallet is a user interface where the private key is stored. There are different types of these wallets.

If a company or business is carrying out activities which involve exchange tokens, they are liable to pay tax on them.

Such activities include:

- Buying and selling exchange tokens
- Exchanging tokens for other assets (including other types of cryptoassets)
- ‘mining’
- Providing goods or services in return for exchange tokens

The type of tax will depend on who is involved in the business and the activities it carries out (including whether these activities count as a trade).

It is likely they will be liable to pay one or more of the following:

- Capital Gains Tax (CGT)
- Corporation Tax (CT)
- Corporation Tax on Chargeable Gains (CTCG)
- Income Tax (IT)
- National Insurance Contributions
- Stamp Taxes

The amount of tax a business must pay will depend on its income, expenditure, profits and gains. These must be declared annually to HMRC on either a:

self-assessment tax return (for individuals); or company tax return (for companies).

HMRC will consider each case on the basis of its own facts and circumstances. It will apply the relevant legislation and case law to determine the correct tax treatment (including where relevant, the contractual terms regulating the exchange tokens).

In the vast majority of cases, individuals hold cryptoassets as a personal investment, usually for capital appreciation or to make particular purchases. They will be liable to pay Capital Gains Tax when they dispose of their cryptoassets.

Individuals will be liable to pay Income Tax and National Insurance contributions on cryptoassets which they receive from:

- Their employer as a form of non-cash payment
- Mining, transaction confirmation or airdrops

There may be cases where the individual is running a business which is carrying on a financial trade in cryptoassets and they will therefore have taxable trading profits. This is likely to be unusual, but in such cases Income Tax rules would take priority over the Capital Gains Tax rules.

If someone has cryptocurrency or is planning on using cryptocurrency in the near future it is important that they understand how it is taxed and are up-to-date on all aspects of taxation.

Lodders is a well-established law firm that has both regional and national coverage, with a huge team of experts and highly skilled staff.

Simply click the ‘Get in touch’ button at the top this page or visit our contact page link below.