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Cryptoassets taxation in the United Kingdom

For those citizens that reside in the United Kingdom and that have crypto assets investments or are contemplating to start in that field, it is important to understand how those assets will be taxed by HM Revenue and Customs (HRMC) and avoid penalties associated to the evasion of taxes generated by them.

For HMRC, crypto assets can be of three different types: exchange tokens (i.e. bitcoin), utility tokens or security tokens. At the moment, only the exchange tokens are considered taxable.

Cryptoactives are usually a personal investment, which means that when the investor disposes of them, they will be subject to pay income tax. Investors who have substantial gains in crypto trading, could face a tax charge.

Additionally, crypto assets will be liable to pay income tax and contribute to National Insurance in the following cases: non-cash payment from employer, mining, airdrops. If there is a business conducting financial trade in crypto assets, the profits generated will be subject to income tax.

In terms of domicile, all crypto assets are placed in the United Kingdom by law, which means the assets will be part of the estate of the owner, for inheritance taxes.

It is necessary for residents of the UK to review how this taxation applies to their crypto assets, since the perspective is becoming complex.

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