At least briefly, until you are completely familiar with the process. These computers are called mining rigs, and recipients of mining rewards are called miners. Just for the month of January, Bitcoin miners received over $1 billion in mining earnings. Although each Bitcoin halving reduces mining rewards, the skyrocketing Bitcoin price more than makes up for it.

Furthermore, in a bid to make the UK more appealing for crypto-related businesses, the UK government has announced plans to reevaluate the tax treatment of DeFi lending and staking activities. Today, that 0.01 Bitcoin is worth £200, and you decide to buy a fancy gadget with it. In this scenario, you made a gain of £100 (£200 – £100), and this gain is subject to Capital Gains Tax.

Taxes on staking and lending income

Once you’ve calculated your gains or losses, it’s time to report them to HMRC. Typically, the gain is calculated as the difference between the selling price and the acquisition cost of the crypto asset. If you obtained the asset at no cost, you should use its market value at the time of acquisition for this calculation. If your losses exceed your gains in a tax year, you can carry forward these losses to offset future gains. This can be especially useful in years when you have high capital gains. It’s important to keep detailed records, as these losses can be carried forward indefinitely but cannot be used to offset other types of income.

KYC is also becoming more important for crypto exchanges and it has been confirmed that HMRC are working with exchanges to share customer information. HMRC are known to have demanded user data from exchanges and have sent educational nudge letters to crypto users in their sight. Miscellaneous Income from crypto should be reported as ‘Other taxable income’ in Box 17 of the SA100 Tax Return form.

How to report cryptocurrency on your taxes

If your claim is successful, you will be able to claim your lost cryptocurrency as a capital loss. Crypto loans could be subject to capital gains tax or income tax, depending https://www.tokenexus.com/crypto-taxes-in-the-united-kingdom/ on if beneficial ownership is retained. It is essential to report all capital losses, as it is the only way they can be ‘claimed’ to use against future gains.