Capital Gains Tax (CGT)
HMRC expect most individuals with cryptoasset activity to be treated as an investor (for capital appreciation), subject to the capital gains tax regime. Where this is the case, they are liable for capital gains tax on the disposal of cryptoassets.
HMRC guidance confirms that disposals for CGT include:
In exceptional circumstances will a taxpayer be treated as a ‘financial trader’ in cryptoassets. In which case these disposals are treated as business trading income, subject to income tax and national insurance.
HMRC’s view of situs is not based on statute (the law) and there are opposing views on the situs of cryptoassets by well respected professionals and academics. However, if a UK resident non-dom claiming the remittance basis wishes to file their crypto taxes on the basis that their cryptoassets are non-UK based, they should consider disclosing this thoroughly on their UK tax return and anticipate an HMRC investigation to challenge the position.
The tax position regarding individuals trading and investing in derivatives over cryptoassets (ie Contract for Difference (CFD’s), Futures and Margin trading) is different to the tax position of an investor buying and selling cryptoassets.
HMRC refer individuals using derivatives to guidance in their Corporate Finance Manual, which is non-cryptoasset specific. Assuming the individual is not treated as a financial trader, the tax position is unclear. Profits or losses arising from derivatives will be either taxed under the capital gains regime or will be subject to income tax and treated as miscellaneous income.
See our detailed guidance on this.
UK tax resident individuals who are non-domiciled in the UK need to consider their tax position very carefully regarding their cryptoasset activity. It is recommended professional tax advice is taken in this matter.
UK tax resident individuals who are not UK tax domiciled (known as 'Non-doms') potentially benefit from the remittance basis of taxation. Where the conditions are met and they make a remittance basis election, they are only chargeable to UK tax on their overseas income and gains, to the extent that they bring them into the UK. If the overseas income and gains remain overseas, they are outside the scope of UK tax.
The deemed location of an individual's cryptoassets for UK tax purposes (often referred to as Situs) is relevant when determining their capital gains tax position. See CRYPTO22600 for HMRC guidance.
HMRC set out in their guidance that cryptoassets are treated as located where the individual is tax resident. Therefore HMRC's view is that UK tax resident non-doms will be subject to UK tax on their cryptoasset income and gains, even where they are claiming the remittance basis.
Non-doms claiming the remittance basis have to be very careful not to bring their overseas income and gains into the UK. A consequence of HMRC's view is that a purchase of cryptoassets by a UK resident non-dom from their overseas income and gains will trigger a taxable remittance at that point.
Last modified 6mo ago