Crypto Assets and Tax
Crypto assets are unique in many ways but the tax treatment isn’t. They are treated like shares and other similar assets with similar tax treatment for similar events.
Crypto-Asset Shares Tax
ICO Initial Coin Offering IPO Initial Public Offering CGT
Forking Bonus issue Not immediately taxable
Staking New issue CGT
Salary / Payment Salary /Payment Income tax
Mining No equivalent CGT or Income tax
So how do we calculate the tax?
For Capital Gains Tax each transaction is potentially a taxable event.
There are 3 matching rules: TCGA 1992.s.106(A)
If there are multiple acquisitions in the Section 104 pool, each share in that pool will be treated as having a base cost equal to the average cost of the shares in the pool as at the date of the disposal.
Can you use free software to calculate your annual gains?
Before you do be very careful, remember HMRC have not endorsed any software so far.
What you need is something designed for the UK tax system, ones that offer Fifo, Lifo or mention the IRS are designed for the US market which is not the same and will give you different results which is why you may well be offered Investigation Insurance.
What should you do?
Simply call for a quote then send a CSV download and have it calculated correctly by a Qualified UK Tax Accountant who knows and understands the rules. For high transaction volumes and large numbers of wallets I use Koinly as my platform of choice.