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Recap HomeCrypto Tax Guide (Lite)HMRC Cryptoassets Manual
  • A Technical Guide to Cryptocurrency Tax for UK Individuals
    • What are Cryptoassets?
    • Who are Recap?
  • CRYPTOCURRENCY TAX
    • Do I Need to Pay Tax on my Cryptoassets?
    • Which Taxes Apply?
      • Capital Gains Tax (CGT)
      • Income tax
      • VAT
      • Inheritance tax
      • Stamp Duty
    • How Much Tax Will I Pay?
    • New HMRC DeFi Guidance
      • Overview of HMRC guidance
      • 1️⃣Is the Reward Income or Capital?
      • 2️⃣Is Beneficial Ownership (BO) transferred?
      • 3️⃣Consider the Tax Treatment
        • Staker/Lender/Collateral Provider
          • Income Rewards
            • BO transferred
              • ➡️At Point of Entry
              • ⬅️At Point of Exit
              • 💧On Liquidation
              • 💎On Receipt of Income Reward
              • Example 1A
              • Example 2A
            • BO not transferred
              • ➡️At Point of Entry
              • ⬅️At Point of Exit
              • 💧On Liquidation
              • 💎On Receipt of Income Reward
              • Example 1B
              • Example 2B
          • Capital Rewards
            • BO transferred
              • ➡️At Point of Entry
              • ⬅️At Point of Exit
              • 💧On Liquidation
              • 💎On Receipt of Capital Reward
              • Example 1C
              • Example 2C
            • BO not transferred
              • ➡️At Point of Entry
              • ⬅️At Point of Exit
              • 💧On Liquidation
              • 💎On Receipt of Capital Reward
              • Example 1D
              • Example 2D
        • Borrower
    • Investor or Trader?
      • Badges of Trade Limitations
      • HMRC Approach
      • Court Cases involving Financial Traders
    • Capital Gains Tax
      • Calculating the Capital Gains Position
      • Disposal proceeds
      • Disposals to Connected Parties
      • Allowable costs for CGT
        • Exchange fees
        • Forks - affect on allowable costs
      • Capital Loss Claims
    • Income Tax
      • Financial trading income
      • Miscellaneous Income
      • Employment income
    • Fair Market Valuation
  • TRANSACTION TYPES
    • 💷Selling Crypto for Fiat
    • 🔄Trading Crypto to Crypto
    • 🛍️Purchases using Crypto
    • 🎁Gifts
    • 💍Spouse Transfers
    • 🎗️Gifts to Charity, CASCs & Bodies for a National Purpose
    • 🎈Airdrops
    • 🤝Staking
    • 💸Transfers
    • 🍴Forks
    • ⛏️Mining
    • 👛Employment income
      • UK Employer
      • Overseas employer
      • National Minimum Wage (NMW)
    • 🚨Lost & Stolen Crypto
    • 🎲Gambling
    • 💧Liquidity Pools
      • Example - Liquidity pool
    • ⬆️Token Upgrades/Swaps
    • 🔮Cryptoasset derivatives (CFDs, Futures and Margin Trading)
    • 💼Crypto Loans
    • 🔄REPOS
    • 🪞Reflections Rewards
    • 👥Referral Income
    • 💳Cashback
    • 🎨NFTs (Non Fungible Tokens)
    • 🎮NFTs earned playing games
  • Record Keeping
  • Filing Your Self-Assessment
    • How to Register for Self-Assessment
    • How to Fill In the Tax Return
    • Submitting the Tax Return and Paying the Tax
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On this page
  • Am I a trader?
  • Probably not...
  • How do I check if I am a trader?
  • Guidance on the tax position for traders

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  1. CRYPTOCURRENCY TAX

Investor or Trader?

PreviousBorrowerNextBadges of Trade Limitations

Last updated 8 months ago

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Am I a trader?

Anyone who buys and sells, or mines cryptoassets, or , needs to first consider if they are engaged in financial trading in cryptoassets, rather than simply assuming they are classed as an investor and taxed under the capital gains tax regime.

Individuals who are classified as financial trading in cryptoassets are required to pay income tax and national insurance on their profits, rather than capital gains tax on their capital gains and income tax on their miscellaneous income. Therefore, being classified as a trader rather than investor usually results in a higher tax bill.

Probably not...

“In the vast majority of cases, individuals hold cryptoassets as a personal investment, usually for capital appreciation or to make particular purchases. They will be liable to pay Capital Gains Tax when they dispose of their cryptoassets.”

HMRC go on to say:

"Only in exceptional circumstances would they expect individuals to buy and sell exchange tokens with such frequency, level of organisation and sophistication that the activities amount to a trade in itself.”

How do I check if I am a trader?

It is not as simple as working through the ‘Badges of Trade’, as these Badges have been demonstrated to have limitations in the field of financial trading.

The question of whether cryptoasset activities amount to trading depends on a number of factors and the individual circumstances. It will ultimately be a question of fact.

Individuals buying and selling cryptoassets will often describe them as ‘trades’. However, HMRC state the use of the term ‘trade’ in this context is not sufficient to be regarded as a financial trade for tax purposes.

Key areas that HMRC will explore when considering if an individual is a financial trader are set out in detail here.

A business trading in cryptoassets would be similar in nature to a business trading in shares, securities and other financial products. Therefore further guidance can be drawn from the existing case law on trading in shares and securities as detailed here.

Guidance on the tax position for traders

Fortunately, HMRC has stated in the Cryptoasset Manual at that:

“As set out in there may be cases where the individual is running a business which is carrying on a financial trade in cryptoassets and they will therefore have taxable trading profits. This is likely to be unusual, but in such cases Income Tax rules would take priority over the Capital Gains Tax rules.”

HMRC go even further than this in where they state:

Considering if you are a financial trader is a very complex area. We recommend you see read our detailed guidance and consult a to consider your specific circumstances.

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professional tax advisor
Badges of Trade Limitations
HMRC Approach
Court Cases involving Financial Traders
Financial trading income
trades in cryptoasset derivatives