What are Cryptoassets?

Cryptoassets are a type of ‘digital asset’, with the most common examples being cryptocurrency such as Bitcoin, or exchange tokens such as non-fungible tokens (NFTs). There are however many forms available.

Whilst these assets are not physical, and differ in some ways from currency and shares, HMRC view the profits and gains from buying and selling cryptoassets as taxable.

With approximately 11% of the UK population owning some form of cryptoasset, we wanted to highlight the tax implications involved.

• Any disposal of cryptoassets for a gain or profit may be subject to tax. This includes selling them for ‘normal or fiat’ currency, transferring them into different currencies (A common example: Transferring bitcoin into Ethereum) but also using them to buy items or giving them away. Each situation will need to be assessed separately and for this reason, it is important to keep records of any cryptoasset transactions each year.
• These are either taxed as income or capital gains, depending on whether you are trading or investing. If you are acting as a dealer making multiple trades, you may be treated as trading and any profits will be taxed under income tax (at your applicable rate) and will also be subject to national insurance. However, if you are buying cryptoassets and holding them for capital appreciation, you would be deemed as an investor and any gains would fall under capital gains tax.
• As with any ‘normal’ capital disposal, you can deduct costs such as the original cost and any incidental costs when purchasing/disposing. You can also offset your annual exemption if not used elsewhere.
• In some circumstances, employers may award employees with cryptoassets as part of an employment incentive. In these situations, they are treated as employment benefits and taxed accordingly.

If you need any more specific information or want to discuss this further, please feel free to contact us!