Gifting Crypto Tax: The Rules Surrounding Gifting Crypto In The UK?
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Gifting crypto has tax implications – in this blog, we’ll run through the main UK rules to keep in mind.
With an estimated 6% in the UK holding crypto, some will have received assets as gifts. Similarly, some current crypto owners will be considering gifting assets to others.
There are tax rules to factor in though. In the UK, it depends on criteria such as who you’re gifting to.
Read on to find out more about why gifting crypto can have tax implications.
What is a ‘gifting crypto tax’?
Just as you might give someone else cash, stocks and shares as a gift, it’s perfectly possible to give crypto as one too.
However, similar to other types of financial gifting, in many countries transferring crypto to someone else counts as a disposal of an asset, or a sale.
Therefore, it is subject to the taxation laws of that country, which brings us to the rules associated with gifting crypto tax.
Capital gains tax (CGT) and gifting crypto: tax rules
If you have bought crypto, then it increased in value – and now you want to gift it to someone else, in many countries it will be subject to CGT.
With CGT, the rise in value or gain the crypto makes is taxed, rather than the full crypto value at the time of gifting.
However, with CGT in general, you may find that you can avoid paying tax on any capital losses, depending on which country you are in.
If you have acquired something, then it decreased in value and now you’re gifting it to someone else, you’re making a capital loss and may not need to pay tax on your gift.
It’s wise to keep track of your losses so that you can try to offset them against any gains, in order to pay less tax overall.
Many countries have a form of CGT, but with different rates and exemptions. Let’s look at some of the principles for calculating your gifting crypto tax in the UK.
Is there a gifting crypto tax in the UK?
Yes, HMRC provided guidance in 2018 on the circumstances in which you need to pay CGT after gifting crypto.
Notably, it’s not required to pay tax on crypto gifts given to your spouse or civil partner (unless you’re separated, or giving them assets for their business to sell on).
Also, in the UK, there is a personal CGT allowance of £12,300 at the time of writing.
Therefore, if your gains from disposing – for example gifting, selling, or swapping – your assets (crypto or otherwise) are under £12,300 in a tax year, no CGT is due.
There is also an impact on the tax rate you pay depending on your income.
Here’s a summary detailing other aspects of HMRC’s stance on paying your gifting crypto tax:
- If you received the asset for free, you use the market value to calculate the gain
- If you use capital losses to reduce your gain, this must be reported to HMRC
- There are some allowable costs you can deduct
Allowable costs you can deduct include any transaction fees paid before your purchase was added to a blockchain, as well as a proportion of any pooled costs. HMRC also requires records for each pool.
Working out pooled costs can be complex – for example, the cost differs if at some point the blockchain had a hard fork – we’ve written previously about famous forks from Bitcoin.
Crypto mining costs are among the expenses that cannot be deducted when calculating gains.
HMRC and crypto tax
Cryptocurrency tax in the UK will keep evolving over time.
We’ve covered cryptocurrency tax in the UK before – it’s worth noting that when trading, for individuals, income tax supersedes CGT. For companies, gains are part of the trading profits.
Since November 2021, HMRC has been sending crypto tax nudge letters to investors – in part for financial reasons, but also for educational purposes.
HMRC uses campaigns like this to remind taxpayers to review their earnings and keep accurate records.
Final thoughts: gifting crypto tax in the UK
The main implications to be aware of in the UK are:
- Crypto gifting is subject to CGT
- It’s not required to pay CGT on crypto gifts given to a spouse or civil partner
- There is a personal CGT allowance, which you can include crypto gains in
For a refresher on crypto assets, we recommend reading our introductory article on Bitcoin, the blockchain and beyond. If you’re looking for a UK crypto accountant, or would like to enquire about any other services, please contact us.