If you’re a UK taxpayer, you may need to declare Bitcoin to HMRC, but it depends on what you’ve done with it.
Here are the main situations:
- Buying and holding Bitcoin: Simply buying Bitcoin and holding it does not usually need to be reported to HMRC.
- Selling Bitcoin: If you sell Bitcoin for a profit, you may have to pay Capital Gains Tax if your taxable gains exceed the annual tax-free allowance (if applicable for the tax year).
- Trading one cryptocurrency for another: Exchanging Bitcoin for another cryptocurrency is generally treated as a disposal and may create a taxable capital gain or loss.
- Using Bitcoin to buy goods or services: Spending Bitcoin is also generally treated as a disposal, so any gain may be taxable.
- Receiving Bitcoin as income: If you’re paid in Bitcoin for employment or self-employment, or you receive it from mining or certain staking activities, it may be subject to Income Tax and possibly National Insurance, depending on the circumstances.
You may need to file a Self Assessment tax return if you have taxable crypto gains or crypto-related income that must be reported.
HMRC expects taxpayers to keep records of:
- Dates of transactions.
- Amounts bought, sold, or exchanged.
- Values in pounds sterling at the time of each transaction.
- Transaction fees.
- Wallet addresses and exchange records where relevant.
Failing to report taxable crypto transactions can result in interest and penalties if tax is owed.
