Cryptoasset tax

As one of the very newest asset types, cryptoassets or cryptocurrency assets still feels like a brave new world to many people.

The unregulated nature and the much reported volatility of cryptoassets mean that it can seem risky and daunting.

corporate tax

We are frequently approached by people who feel very unsure about cryptocurrency – the questions they ask us the most are:

  • What are cryptoassets?
  • What are the different types of cryptoasset?
  • What taxes apply to cryptoassets?

We have provided some brief answers in our FAQs below. However, if you are seeking more detailed information on and help with these or similar questions, please just give us a call, and we will be happy to help you unravel the tangled skein that is crypto.

Cryptoassets (also referred to as ‘tokens’ or ‘cryptocurrency’) are cryptographically secured digital representations of value or contractual rights that can be:

  • transferred
  • stored
  • traded electronically

The exception is that private keys, which are needed to actually implement crypto transactions, are information and not property.

There are four main types of cryptoasset:

  • Cryptocurrency (e.g. Bitcoin), designed to be used as a payment mechanism
  • Utility tokens: gives the holder access to goods or services
  • Security tokens: gives an interest in a business
  • Stablecoins: a form of cryptoasset pegged to a mainstream currency such as the dollar. These are currently taxed as cryptoassets and not considered currency

NFTs (Non-Fungible Tokens) are not listed by HMRC. These may be a utility token or may represent physical assets or even other digital assets.

The key question for individuals is whether the disposal of cryptoassets is subject to income tax or capital gains tax.

The short answer is that individuals will usually be subject to capital gains tax on the disposal of cryptoassets, but there are some circumstances where income tax will apply. 

These include: 

  • If trading, but HMRC states this is ‘only in exceptional circumstances’
  • Cryptoassets received for employment
  • When mining cryptocurrency (the process used to generate new coins and verify new transactions)
  • When staking cryptocurrency (passive income from cryptocurrency holdings)
  • On airdrops (tokens delivered to the wallets of current cryptocurrency traders, either for free or in exchange for a small promotional service)

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