Crypto-currency trading profits are subject to taxation in the UK. An individual or company with UK tax residency is taxed on profits made when currency is sold at a gain.

These gains must be recorded and reported to HMRC via a self-assessment personal tax return if held personally, or via a corporation tax return if held via a limited company.

Usually, individual investor gains are treated as capital gains in a personal tax return; however, there are times when the gains can be classified as trading profits and subject to income tax rules. The taxation result between capital gains and income tax can be substantial, making it essential that the gains are reported correctly.

Capital gains tax (CGT) is based on the difference between the price at which the asset was acquired and the amount at which it sold/traded for. There is also a tax-free allowance, known as the ‘Annual Exempt Amount’, which individuals have before capital gains tax is assessed. This allowance is refreshed each tax year, therefore it’s beneficial for individuals to spread gains if possible.

Accurate trading records need to be kept to ensure the correct gains and/or losses calculations are made for tax. Nasa Consulting advises its clients on relevant and user-friendly software for record keeping, and can assist with the subsequent personal tax return or corporation tax return.