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Cryptoassets and UK Tax- FAQs

UK tax returns are due by the end of January – but do you know whether you need to report your cryptoassets?

31 January is a key date in the UK tax year, as the deadline for submitting a self-assessment tax return.  Hopefully by the time you read this you will be secure in the knowledge that your own return has been submitted, if you are a self-assessment taxpayer.  However, if you have been investing in cryptoassets, are you sure that you have reported everything you need to? Unfortunately, given this is such a new type of asset and the law is still being established, many people are unaware of the tax rules relating to their cryptoasset holdings.

For example, have you ever found yourself thinking along the following lines: 

• I’ve invested into crypto, and I switch between different tokens from time to time, but until I cash in for fiat currency I don’t have any tax issues to worry about. 

• I can’t have a UK tax liability on my crypto, because I’m within the FIG regime, and only deal with offshore exchanges. 

• I don’t need to declare tax on my crypto, because HMRC have never asked me to submit a tax return. 

If so, you need to carefully consider your tax position – read on for more details. 

Capital Gains Tax  – Do I have to pay CGT on cryptoassets? 

In the UK, capital gains tax (CGT) is payable on the disposal of any asset.  In a straightforward case, this would be when you sell something for cash.  For example, if you purchased a Bitcoin in 2010 for £10,000, and you’re selling it now for £80,000, then you would have made a capital gain of £70,000, less any deductible costs. 

Do I have to pay tax if I swap one crypto token for another? 

However, the concept of a disposal goes far beyond a cash sale.  For one thing, it includes an exchange of one asset for another, even where one cryptoasset token is swapped for another.  Therefore, if instead of selling your Bitcoin for cash you had exchanged it for 30 ETH, you have still made a disposal, and so could be liable for CGT on the difference between the price you paid for the Bitcoin, and the market value of the ETH received in exchange. 

Do I have to pay tax if I gift or spend a crypto token? 

More broadly, you will be making a disposal whenever you give up your ownership of a token.  For example, if you make a gift to somebody, or spend it, such as to purchase an NFT or to pay for other goods or services.  Each of these scenarios can be subject to CGT. 

Do I have to pay tax on mining or staking? 

If you are receiving tokens through mining on a proof of work blockchain, or staking on a proof of stake blockchain, then you need to consider whether this is subject to income tax. 

The law on this issue is currently not certain, but HMRC’s view is that generally income from mining or staking will be subject to income tax, after deduction of certain allowable expenses. We can provide advice on this topic.

Remittance basis/FIG regime taxpayers – are crypto gains and income subject to UK tax? 

If you were a remittance basis taxpayer in past years, you do not have to pay UK tax on relevant foreign income, or foreign chargeable gains, from that period if such income or gains are not remitted (or brought back) to the UK. If you qualify for the new Foreign Income and Gains (FIG) regime, you do not have to pay UK tax on relevant foreign income, or foreign chargeable gains, while within the FIG regime. However, can a decentralised cryptoasset recorded on a global blockchain be said to be ‘foreign’? 

Again, the law has not yet fully clarified this point.  However, you need to be aware that HMRC has taken a very wide interpretation of the law, based on the residence of the beneficial owner. HMRC’s position means that remittance basis/FIG regime taxpayers are unlikely to escape UK tax on their cryptoasset income and gains, even where tokens are held for them by a foreign exchange or via a wallet held outside the UK. 

If you find yourself in this position, you need to take legal/tax advice, as the position is likely to turn on the precise factual arrangements, as well as the interpretation of the law.  

What to do about your cryptoasset taxes 

If you find yourself having made cryptoasset disposals, then you need to consider your potential CGT or income tax liability and whether this needs to be reported to HMRC.  CGT and income tax are both self-assessment taxes, which means that it is your responsibility to ensure you have reported anything you need to report, whether or not HMRC have already asked you to submit a tax return. 

The calculations are not straightforward.  For one thing, there will be various deductible costs, to reduce your tax liability.  For another, fungible cryptoasset tokens are subject to the share pooling rules, meaning that it is necessary to work out an average cost based on all of your purchases. 

Specialist software is available, which can help with these calculations.  However, you need to understand the legal interpretation of transactions in order to ensure that the software is analysing your tax liability correctly. 

If the result is that you have made a net loss for the year, then you may not need to submit a tax return, but it can still be worth reporting your losses to HMRC to enable them to be deducted against gains you make in the future.

How Quastels can help with cryptoasset taxes 

Ben Rosen, Partner, and Jack Burroughs, Senior Associate, in the Private Wealth and Tax team are leading experts on the legal and tax treatment of cryptoassets.  We can therefore advise you on the issues that might arise in calculating your taxes, including: 

• which transactions are disposals for CGT; 

• how staking and mining income is calculated; and 

• whether gains and income are located in the UK or abroad. 

We can provide the analysis of your cryptoasset gains and income needed to submit your tax return, and state your legal position to HMRC where the law is unclear or where mistakes may have been made. We are also able to assist with your estate planning for cryptoassets, helping to ensure that your tokens can pass to those you want to receive them, as tax-efficiently as possible. 

To discuss your circumstances and find out how we can help you, please get in touch. 

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The Final Straw? – Key Changes to Agricultural and Business Property Relief (APR and BPR) and What They Mean for the Future of Farms

Tractors descending on Whitehall, Jeremy Clarkson up in arms and landowners across the country fearing for the future of farming. So, what’s it all about? Here’s what we think farmers, landowners and business owners need to know about the substantial changes to Agricultural Property Relief (APR) and Business Property Relief (BPR), set to take effect from 6 April 2026.

What are APR and BPR?

APR and BPR are reliefs that reduce inheritance tax (IHT) on agricultural and business assets, intended to ensure that family farms can remain operational following a change of ownership. IHT is charged on transfers of value (e.g property, savings and personal belongings) at a standard rate of 40%.

• APR historically provided 100% or 50% relief on agricultural property, such as farmland or certain farm buildings, to reduce IHT on estates.
• BPR offered similar relief for business property, such as shares in a family trading business, reducing IHT on assets outside agricultural property.

What is Changing From 6 April 2026?

£1 million relief cap

Following the Government’s Autumn Budget, the proposal is that only £1 million of an estate’s agricultural and business property will now qualify for 100% relief from IHT. If an estate consists of both agricultural and business assets, the £1 million cap will be divided between the two based on their value.

The Government have stated that this is expected to affect the “wealthiest 500 estates,” however the uproar from the farming community goes some way to suggest the widespread impact this cap will have. It remains to be seen if the clamour in Westminster will be enough to prevent this change.

Let’s consider an example:

A farmer owns an estate worth £8 million which contains a farm worth £6 million and a business worth £2 million. On the farmer’s death, the estate would be subject to the £1 million 100% relief as follows (for illustrative purposes, we are assuming that there is no available nil rate band):

• • £750,000 relief for the farm (75% of £1 million).
  • £250,000 relief for the business (25% of £1 million).

The remaining £7 million of the estate will be subject to reduced relief (see below).

50% relief beyond the £1 million cap

Once the £1 million cap is exceeded, assets will qualify for 50% relief from IHT. Assets currently receiving 50% relief will not use up or be affected by the new allowance, but any unused allowance will not be transferable between spouses and civil partners. Put simply, this results in an effective IHT rate of 20% on the value of APR qualifying assets exceeding the £1 million cap.

Using the example above, the remaining £7 million on our farmer’s estate would receive 50% relief, leaving £3.50 million taxable value, or framed differently, a 20% tax on the £7 million excess.

The inheritance tax that will be owed on the estate would be £1.4 million.

This tax can also be paid interest-free, in instalments, over a 10 period, which may help ease the financial burden farmers will now face.

Lifetime transfers and trusts 

From 30 October 2024, these new caps and reliefs will also apply to lifetime transfers made within the seven years before death, if the donor dies on or after 6 April 2026. Similarly, trusts will receive 50% relief on  ten-year IHT charges and any smaller charges when property exits the trust. This may mean that farmers could transfer large parts of their estate into a “discretionary” or “interest in possession” trust now without an IHT liability arising immediately, although relevant property charges will likely arise for the trustees.. The Government will publish a consultation in early 2025 on the detailed application of charges on property within trusts.

This means that if our farmer made a lifetime gift of his £6 million farm to his children today and then died two years after making the gift, the transfer would be charged to IHT, subject to the new reliefs set out above. However, if our farmer made the gift today and died on 6 April 2032 (i.e. over seven years since making the gift) there would be no IHT liability for his children.

Changes to BPR

BPR will now apply at 50% instead of 100% for shares in businesses not listed on “recognised stock exchanges,” such as AIM (Alternative Investment Market) shares.

What Does This Mean For The Future of Farming?

For farmers and business owners, these changes to APR and BPR are certainly unwelcome. There is a divide between the farming community and the Government, with farmers arguing that the high capital value of their estates is disproportionate to the low income that they generate. Their major concern is that the Government’s reduction of APR and BPR will result in land being sold piecemeal to meet the new IHT liability. This, in turn, could lead to estates becoming unviable and farmers having to sell up altogether.

It is more crucial than ever to seek advice on wealth protection and planning opportunities as early as possible. With an understanding of what an estate consists of, there are measures, such as lifetime gifts or the formation of trusts, which could help lessen the burden that these changes will bring.

Please do contact the Private Wealth & Tax team to understand the implications for you and/or your clients.

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Autumn Budget – The Quastels’ Take

Billed as a ‘once in a generation event’, the hotly anticipated Autumn Budget has been the subject of intense speculation for what seemed an eon in the private wealth sector and our clients. Looking at the announcements broadly, then, it was a Budget for which, for all intents and purposes, we prepared ourselves: large tax rises, more borrowing and commitment to increased public spending and investment.

We set out below our initial thoughts on the key proposals affecting our clients.

Non-Domiciles

The surprises came in the form of tempered measures and concessions, in attempts to stem the stampede of foreign HNWs for the departure gates at Heathrow, including:

• a tapering of the Inheritance Tax ‘tail’ on worldwide assets of between three to ten years, depending on the length of residence in the UK; and
• an extension of the ‘Temporary Repatriation Facility’ to three years, at a reduced rate of 12% for the first two years and 15% for the third year, for those who have previously claimed the remittance basis.

Although these measures are more ‘moderate’ compared to previous proposals, , the scrapping of protected status for trusts settled by non-domiciliaries, with no grandfathering provisions will not be warmly embraced.

Whether taxpayers and their advisors will agree with the Chancellor that the new residence-based regime is ‘internationally competitive’, will be evaluated more accurately through the passage of time.

Capital Gains Tax and Inheritance Tax

At the height of the pre-budget frenzy, it was speculated that Capital Gains Tax (CGT) rates would be aligned with Income Tax rates and that that various Inheritance Tax (IHT) reliefs would be removed.

Clients and their advisers gained some comfort that the rates announced for CGT (an increase of the main rate from 10% to 18% for basic rate taxpayers and from 20% to 24% for higher rate and additional rate taxpayers, to align with residential property rates) were more conservative when held up against media speculation.

Business Asset Disposal Relief and Investors’ Relief is also set to rise from next year, making it more costly for those selling their companies.

Whilst fears that Business Property Relief (BPR) and Agricultural Property Relief (APR) would be removed entirely did not come to pass, the restriction of 100% relief to the first £1,000,000 of combined business and agricultural property, with values in excess of this amount only benefitting from 50% relief from April 2026, has been met with robust responses.

For many businesses, the £1,000,000 cap is likely to be insufficient for even the smallest of operations and IHT will be an existential threat to the continuity of businesses. In sectors such as farming with high capital values and increasingly low yields, for example, it will be a real concern that IHT could lead to the breakup of farms.

Unused pensions and death benefits payable from a pension which largely sit outside an individual’s estate for IHT purposes, will also become subject to IHT from 2027.

However, the rules surrounding gifting remain unchanged for now, and it is likely that gifting onto the next generation will be accelerated and will form an important part of succession planning where feasible.

Wealth Taxes

Whilst the UK does not levy a tax on wealth per se, many may view the newly proposed levies as such.

The Government has committed to applying VAT to private school fees from 1 January 2025. VAT for the supply of services (education in this case) will be subject to where it is delivered and it is unclear whether this will deter international students from UK independent schooling due to the higher fees.

The Chancellor, in a mocking quip to the former prime minister Rishi Sunak, also confirmed a 50% uplift in air passenger duty (APD) for trips by private jet from 2027/28.

In a commitment to support first-time buyers of property in the UK, it was also announced that the Stamp Duty Land Tax surcharge on additional property will rise from 3% to 5%. This surcharge also applies to those purchasing buy-to-let residential properties.

Conclusion

It has always been crucial for HNW/UHNW individuals and families to seek advice on wealth protection and planning opportunities as early as possible. However, with unused pensions being brought into scope of IHT and the restriction of full BPR and APR subject to a cap, many who would have considered themselves to be of more moderate wealth or who have business operations, will now need to give serious thought as to gifting and succession planning during their lifetimes.

For non-domiciled individuals, the Budget has provided certainty on the abolition of the current tax regime, but it remains to be seen whether the four-year foreign income and gains regime, will be a sufficient sweetener for prospective inpatriates whom the Government hope to become long-term taxpayers.

Please do contact the Private Wealth & Tax team to understand the implications for you and/or your clients.

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