Advice + Tax + Accounts for smart business owners.
April 30th 2021

Cryptoassets: how is crypto mining taxed in the UK?

Crypto "miners" add transactions to the blockchain digital ledger and may be awarded tokens for this activity.

An important question from a UK tax perspective, is whether the mining activity amounts to a "trade"; if it does, then the tokens received are regarded as income from a trade, and the miner (assuming they are an individual rather than a company) will be taxed accordingly.

Whether the mining activity amounts to a trade depends on a range of factors which need to be considered - there is no "bright line" test. HMRC will consider whether the frequency of activity, degree of organisation, and level of sophistication point to the existence of a trade.

Where the mining activity does not amount to a trade, any tokens received will probably still be taxed - but under an alternative set of rules concerning "miscellaneous income", which are there to 'sweep up' most income that has not already been caught under any of the other tax rules!

Where the mining activity amounts to a trade then the individual may also be liable to pay Class 2 and Class 4 National Insurance contributions.

The same principles apply to mining involving the 'staking' of exchange coins.

If the mined tokens are subsequently sold, any gains or losses may be dealt with under the Capital Gains Tax regime.

Contact us today for help with your crypto tax affaiirs.

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