How Crypto Taxes Work in the UK? Essential Tips for Businesses

With the advancement of technology, digital currency has also grown popular. Do you know what’s exciting about crypto? People hope to make their fortune quickly and overnight. But what comes next? People mistakenly hope to gain digital currency assets with no added tax return. Are you also trading with Bitcoin, Ethereum, and Binance Coin? Then beware, as trading is now HMRC’s attraction. However, experts can help you stay compliant and manage your digital currency tax implications to avoid penalties.

So, do you want to know how crypto taxes work in the UK? This article will answer all your crypto accounting-related queries and explain how an expert accountant can help you comply with taxes.

• What Exactly Is the Cryptocurrency?
• How Does Cryptocurrency Tax Accounting UK Work?
• How the Cryptocurrency is Taxed in the UK?
• Do Limited Companies Buy and Hold Cryptocurrency?
• Can My Limited Company Invest in Crypto?
• Can the Investment of a Limited Company Fail?
• How Lockhart Amin Accountants Can Help?

Before delving into details, let’s explore cryptocurrency in depth.

What Exactly Is the Cryptocurrency?

Cryptocurrency is a virtual or digital currency that works on cryptography to secure transactions. Crypto transactions use a decentralised system to maintain and verify the transaction record.

Nowadays, Ethereum and Bitcoin are the subject of hype due to their higher price ranges. However, thousands of other cryptocurrencies have different objectives and features.

Cryptocurrency is a digital asset used to buy and sell products and store them in digital wallets. It enables everyone to send and receive payments. HMRC also states that cryptocurrency is not money or currency but a crypto asset. These broader terms not only cover traditional assets but also include utility or security tokens.

How Does Cryptocurrency Tax Accounting Work?

Cryptocurrency accounting sounds tricky to every trader. The process involves precise recordkeeping of transactions, purchases, sales, trades, and mining activities.

If you have also invested, you might be aware that the value of crypto fluctuates every minute. That is why a person must have the expertise to manage and record it carefully. So, as expert accountants, we manage and take care of every transaction through accurate tracking. Also, we fully manage documentation for gain and loss calculation that aligns with HMRC rules.

This brief process involves tracking crypto costs and holdings, ensuring tax accuracy. Individuals and businesses that do thousands of transactions annually face complicated accounting situations. HMRC crypto tax rules are different from those of traditional asset taxation. That means there’s a chance HMRC will notify them, so they must report these gains or losses on their financial statements to avoid penalties. So, if a business person has invested in crypto trading, efficient accounting is required to manage and report financial activities and tax liabilities accurately.

How are the Crypto Taxes implemented in the UK?

Crypto taxation depends on many cases. Mostly, if you own crypto personally, you are subject to Capital Gains Tax. However, there is more to buying and selling crypto. It can be purchased and acquired through staking and mining. So paying tax whenever a crypto asset is disposed of, whether you gift, sell, or trade it for another crypto, is mandatory. You must pay tax whether the asset was gifted, sold, exchanged for another crypto asset, or used to purchase any other item or service.

As previously discussed, the disposal will be subject to capital gains tax. However, HMRC may be subject to crypto income tax; this is still unresolved.

Do Limited Companies Buy and Hold Cryptocurrency?

Yes, a limited company can purchase cryptocurrency. However, certain factors, including plans and the reason behind the investment, matter, as there are other tax-efficient options for Limited Companies.

Can My Limited Company Invest in Crypto?

Yes, crypto can be purchased via a limited company. However, it all depends on your ideas, circumstances, and why you want to invest. Depending on your situation, there may be more tax-efficient options available.

Proper research is essential before investing or trading with digital currency. As a limited company uses a company name for holding investments, this should be the same for crypto investments. Crypto investments could be seen as a personal asset, subject to personal tax, or treated as a director loan. Also, any profit you gain on investment will be subject to a self-assessment tax return or can be opposed to corporation tax via a limited company.

Can the Investment of a Limited Company Fail?

Cryptocurrency sometimes operates on luck and smartness. It may fail despite significant investments. There can be a point when all your assets become worthless or negligible. Here, the owner of assets can make a claim as the assets are disposed of. Also, if the asset has become worthless, HMRC will still take notice as the owner still has access to the crypto investment. Whether it’s due to forgetting the password or losing access to the account, it’s still your asset. So, HMRC would not consider it to be a disposal.

How Lockhart Amin Accountants Can Help?

We at Lockhart Amin Accountants have collaborated with various self-employed individuals. Every self-employed person owns a different business that requires different accounting solutions. We know how to align with your requirements and maximise your business tax efficiency. Our experts know how crypto taxes work in the UK. They can easily manage your crypto accounts and help you navigate the complex UK tax laws. We also ensure that your business is more tax-efficient.

Here’s How We Will Help You

We can help you with tax implications personally and through a limited company.

For Capital Gains Tax Purposes, pooling crypto is necessary.

Maintain a record of crypto gains and trading with complete preparation of your self-assessment tax.

Limited company crypto trading.

We know how busy life gets when you run your business, and it can be challenging to maintain a work-life balance. You might get worried about the ins and outs of crypto tax laws, so Lockhart Amin Accountants is here to make everything easy and simple for you.