Cryptoassets: common tax mistakes to avoid

Cryptoassets can create unexpected tax liabilities. HMRC’s guidance highlights several areas where mistake can be made.

• Assuming crypto-to-crypto exchanges are tax-free. Exchanging one type of cryptoasset for another can count as a disposal for Capital Gains Tax (CGT) purposes.
• Forgetting that spending crypto can trigger CGT. Using tokens to buy goods or services may count as disposing of them.
• Assuming all gifts are tax-free. Giving cryptoassets away can trigger CGT, although gifts to a spouse or civil partner are generally treated differently.
• Ignoring income from mining or staking. Cryptoassets received from mining, staking, lending or decentralised finance (DeFi) may be taxable as income, depending on the circumstances.
• Overlooking employment-related crypto payments. Tokens received from an employer may be subject to Income Tax and National Insurance contributions.
• Failing to keep transaction records. Investors should retain details of purchases, disposals, quantities, dates, costs and values. Exchange reports may not contain everything needed for tax calculations.
• Using incorrect valuations. Transactions and gains must be calculated in pounds sterling, using an appropriate and consistent valuation method.
• Failing to report taxable income or gains. Investors should check whether they need to report cryptoasset activity on a self-assessment tax return. Those who discover unpaid tax from earlier years can use HMRC’s cryptoasset disclosure service.