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.