Investors will have to provide their name, date of birth, home address, country of residence, and national insurance numbers (tax identification numbers if they are not residents of the UK).
Service providers will then collect details of any transactions, including the type of crypto assets being exchanged and the number of units. Your crypto asset activity will then be linked to your tax record. The penalties for incorrect information will be a fine of £300.
Cryptocurrency has become more mainstream in recent years; however, it can still be a complex area to navigate, especially in terms of your tax responsibilities as an investor.
Capital Gains Tax
Capital gains tax may become due on crypto transactions when a sale is made, when tokens are used to pay for services, and when tokens are given away to another person, unless this person is a spouse or civil partner. This is also the case if a donation is made to charity in the form of cryptocurrency.
It is worth noting that capital gains tax may also be due when one token is exchanged for another. This can be confusing, as no money is changing hands, however the value of the tokens must be considered when investigating whether a loss or gain has arisen.
There are cases where the market value is used instead of the sale price, as in cases where the disposal is made to a connected person. The proceeds (the value of the token you are receiving) will then be used as the base cost when you dispose of the new token, so it’s important to retain the details for your records.
In terms of the tax rate, crypto assets are taxable at a rate of 18% for basic rate taxpayers and 24% for higher or additional rate taxpayers.
Income Tax and National Insurance
You may receive crypto assets as part of your financial compensation from your employer, in which case you will pay income tax and national insurance upon receipt at your normal rates (20% for basic rate taxpayers, 40% for higher rate taxpayers and 45% for additional rate taxpayers). If you go on to make a gain on the sale of these assets, capital gains tax will also be due after the transaction. It is necessary to check with your employer as to whether tax and national insurance was, or should have been, paid through PAYE.
HMRC consider all currency received from ‘mining’, ‘staking’ or ‘lending’ as income and as such income tax is due on tokens received from any of these activities.
If HMRC discover that a gain/income has not been reported there may be penalties and interest due on the underpaid tax. It is therefore important that you keep accurate records of token types, dates of receipt, purchase costs, holdings and disposals that you make throughout your investing journey.
Do you need help ensuring your affairs are in order before the implementation of these new rules in January 2026? Please contact Catrin James at catrin.james@kilsbywilliams.com to discuss cryptocurrency further, or your usual advisor on 01633 810081. You may prefer to email info@kilsbywilliams.com for more general enquiries and advice.
