How to pay crypto tax in UK?

[JamesDaniel90]

I first started investing in crypto January last year so most of my time I have been in the red and yet to experience any profit. I have just been dollar cost averaging the last 12 months and holding, not planning to sell until 2024 at least.

Due to this pump in the last week my portfolio is almost break even which is good to see. I don't expect it to last however as another crash will come eventually.

It has got me thinking of what the bull run will be like next year and what happens when I eventually decide to take profit.

How does tax work in the UK? Do we just withdraw our funds and then pay tax or does it have to be sorted out before withdrawing?

[Doan9269]

You dont pay tax for having crypto in your wallet but exchanges pay do, paying tax is acceptable in fiat as individuals or business owner, this are the registration you undergoes when you wanted your business to get established and registered under government rule, this act of paying tax is what has been in place since ancient days, so paying tax is as simple a the procedures in doing do as long as you're willing and interested in paying, government always had it accounts stipulated for doing so whenever you appear before them for paying.

[Pokapoka124]

How does tax work in the UK? Do we just withdraw our funds and then pay tax or does it have to be sorted out before withdrawing?

Good question. I don’t think you can get away with not paying taxes in a strict country like the UK, I advise you to keep a record of your transactions and consult a professional for advice so you don’t get into trouble and end up paying more than you bargained for. I found this article on the internet, they give a good assessment of how bitcoin is taxed. You can use their calculator to see how much you could be taxed for crypto gains.

In the UK, you have to pay tax on profits over £12,300. And so irrespective of your view on the validity of cryptocurrency, you will always be liable to pay tax on your investment profits from them.

[JamesDaniel90]

You dont pay tax for having crypto in your wallet but exchanges pay do, paying tax is acceptable in fiat as individuals or business owner, this are the registration you undergoes when you wanted your business to get established and registered under government rule, this act of paying tax is what has been in place since ancient days, so paying tax is as simple a the procedures in doing do as long as you're willing and interested in paying, government always had it accounts stipulated for doing so whenever you appear before them for paying.

If for example I had spent £5k on crypto during 2022/2023 and in 2024 I wanted to withdraw £100k profits, what is the tax on that and how do I pay it?

I am new to this so would just like to be prepared for when the time comes and I want to withdraw profits.

[stompix]

Do we just withdraw our funds and then pay tax or does it have to be sorted out before withdrawing?

You pay taxes on your capital gains over the year, this means that there is no "sorting out" before withdrawing!

I don't know if you ever encountered or will encounter such a thing but again, this is a place to mention a warning for everyone that any shady exchange asking you for a sum of money to pay taxes before withdrawing your fund is a scam!

If for example I had spent £5k on crypto during 2022/2023 and in 2024 I wanted to withdraw £100k profits, what is the tax on that and how do I pay it?

@Pokapoka124 linked you to a tax calculator, selling Bitcoins at a profit in UK will make you pay Capital Tax gains, depending on your other income and the amount you have cashed out you might qualify for the no tax, low tax or in the case above you're going over the brackets so you'll have to pay around £12k for this.

But things change, Uk is moving to lower the CGT allowance from £12.3k to £6k this year and even further to maybe £3k the next so it all comes down to what the taxes are in the year you want to sell and take your profits! And nobody can be really sure what these will be in 2024!

[un_rank]

I have just been dollar cost averaging the last 12 months and holding, not planning to sell until 2024 at least.

Since you are Dollar cost averaging, you would want to keep records of all your transactions at the time you bought and the price of bitcoin at that time in the U.K. exchange rate. This would make it easier to pay the tax at the time it is due.
The link shared by Pokapoka124 would prove useful if you read it and as advised use the services of a professional to avoid making any mistakes.

You pay taxes on your capital gains over the year, this means that there is no "sorting out" before withdrawing!

Does this mean one would pay capital tax even though they are yet to liquidate their assets?

- Jay -

[stompix]

You pay taxes on your capital gains over the year, this means that there is no "sorting out" before withdrawing!

Does this mean one would pay capital tax even though they are yet to liquidate their assets?
- Jay -

No, you pay capital gains when you make those gains, and this can't be done without you first selling them and thus taking your gains.

If you sell your coins for $ and leave those $ for years there and do not withdraw them you will indeed pay taxes even without cashing out to a bank account, but that's most likely an exception for many, what I was trying to say is that if you sell your coins today you don't have to pay taxes tomorrow before the exchange allows you to withdraw.

[JamesDaniel90]

Is it best not to have so many transactions when it comes to working out how much tax to pay when the time comes?

I have been doing a little bit of trading over the last few weeks but thinking if that is going to make things more complicated by the time I need to submit everything then I will leave it.

I must have around 500 transactions on my crypto exchange as it is , thinking I don't want to add many more if it is just going to make it harder to calculate everything once I am sorting taxes out.

[Jet Cash]

Maybe you should use a wallet that allows you to select the Bitcoin transactions you are selling. You should be able to optimise your sales and transfers to take advantage of the CGT allowances.

[Yogee]

Is it best not to have so many transactions when it comes to working out how much tax to pay when the time comes?

It would be easier to sort if you have fewer but how much tax to pay is not based on the number of transactions but on the gains you make from those taxable transactions. Trade as many as you like and profit as much as you want....just get a professional to handle tax matters and save yourself from all the headache.

[armanda90]

Before asking about how to pay crypto tax in your country is United Kingdom you have to know about your country regulation about crypto, I heard there bitcoin still restrict and not allowed there use bitcoin as legal currency transaction. No matter for thinking about how to pay tax in your country United Kingdom.

Difference case in my country, although bitcoin illegal using for payment currency but have been legal as investment assets and every time make transaction between buying or selling crypto assets in local decentralize exchange market we have to pay fees under 1%, have been adopted more than last several months and tax income more than thousand hundred million.

[Rikafip]

Before asking about how to pay crypto tax in your country is United Kingdom you have to know about your country regulation about crypto, I heard there bitcoin still restrict and not allowed there use bitcoin as legal currency transaction. No matter for thinking about how to pay tax in your country United Kingdom.

Just because Bitcoin is not a legal tender in UK it doesn't mean that people don't have to/can't pay crypto tax. Its treated like in majority of other countries, meaning you have to pay either capital gains tax on income tax.

[stompix]

Before asking about how to pay crypto tax in your country is United Kingdom you have to know about your country regulation about crypto, I heard there bitcoin still restrict and not allowed there use bitcoin as legal currency transaction.

You heard that from who?

I must have around 500 transactions on my crypto exchange as it is , thinking I don't want to add many more if it is just going to make it harder to calculate everything once I am sorting taxes out.

Are you using a major exchange?
If you're an active trader and do more than 50 trades a day manual is simply a no-go, just use a tax calculator.
Both Koinly and Cryptotax offer a free plan for under 1k transactions, just give it a try, some exchanges even offer that for free, providing a tax form directly.