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Staking

What is Staking?

Staking is where you can stake some of your crypto to contribute to the Proof of Stake network of that asset. As a reward, you earn more assets from the network at a percentage rate over time.
HMRC explains the term Staking at CRYPTO10300 as below:
This has developed as an alternative to Proof of Work due to the significant amount of energy and computing power that system requires. Under Proof of Stake, the ability to create a new entry is determined by a userโ€™s wealth in the cryptoasset (or โ€˜stakeโ€™) rather than them having the computer power to solve a puzzle before anyone else does. Here, those verifying transactions are rewarded with fees for facilitating the transaction instead of any new tokens.

Tax Treatment of Staking

Income Tax

HMRCโ€™s broad expectation is that staking will be taxed as miscellaneous income and will only in exceptional circumstances amount to a financial trading activity.
HMRC confirms that where the staking activity does not amount to a trade, the sterling value (at the time of receipt) of any tokens received from staking will be taxable as miscellaneous income subject to income tax, with any allowable expenses reducing the amount chargeable.
See our detailed guidance...

Capital Gains Tax

HMRCโ€™s only reference to staking in their guidance confirms that rewards received as a result of staking are taxable as income; most likely miscellaneous income assuming they are not financial trading in cryptoassets.
The HMRC guidance is silent on the CGT position of staking. It is likely this is on assumption that beneficial ownership of the tokens is retained by the taxpayer whilst they are staked, so there is no disposal of the tokens for tax purposes upon staking them.
The receipt of cryptoasset tokens as a staking reward is an acquisition of those tokens for CGT purposes. The sterling market value at the date of receipt is the CGT acquisition cost. The acquisition of tokens is in not a CGT event.
When these tokens received as rewards are later disposed of, there may be a capital gain or capital loss depending on the change in value since acquisition and the application of the share matching rules, dictating which cost is offset against a disposal.

Staking in Recapโ€‹

Recap has been designed from the ground up to work out the capital gains impact of staking based transactions.
  1. 1.
    Simply connect your exchange accounts or wallets through our automated integrations or enter your data manually via the user interface or CSV file.
  2. 2.
    Recap only creates taxable events for staking reward transactions, generating acquisition and income tax events based on the cryptoasset's GBP market value which is determined by Recap's own market valuation engine using both foreign and cryptocurrency exchange rates.
  3. 3.
    See the tax impact of every staking reward transaction (example below) in the tax tab or download a PDF tax report
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Last modified 3d ago