eSignature Licitness for Accounting and Tax in United Kingdom

How to eSign a document: eSignature licitness for Accounting and Tax in United Kingdom

if you live in the UK you should know that hmrc is leading an international Crackdown on crypto taxes and with Bitcoin reaching an all-time high price in March of this year many investors will be realizing a profit one in 10 adults in the UK own crypto assets and if you're one of them you need to know what taxes are payable on your crypto assets how much tax you might need to pay and some ways that you can legally pay less tax well we'll cover all three of these questions in this video I'm Kieran and I'm a qualified accountant with over 10 years experience working for some of the leading tax practices in the UK this is not tax advice it's purely educational taxation of crypto assets is a complex area that's constantly evolving so if you own crypto assets then you should consult your own Tax Advisor to understand your tax obligations let's get straight into it by covering off what we mean by crypto assets hmrc discloses a list of what it considers to be crypto assets or s and so these are what we are covering in this video importantly hmrc look to the nature and use of the crypto asset when deciding how it should be taxed so next let's look at which taxes apply to crypto assets the UK does not have a specific taxation regime for crypto assets instead the usual UK tax rules apply and hmrc have told us that there are two taxes that could apply for individuals who own crypto assets the first one is capital gains tax hmrc have advised that the vast majority of individuals who own crypto assets will hold them for personal investing and so capital gains tax will be applicable on disposal secondly income tax rules can apply when a person person receives s in exchange for employment because then income tax and National Insurance would be due on the receipt of s income tax rules would also apply when you carry on a trade in crypto assets but hmrc advised that this would only happen in exceptional circumstances activities like crypto staking and crypto mining could fall into this category both cryp crypto Mining and crypto staking could be deemed to be trading activities but where they're not they will be classed as miscellaneous income the key thing with both trading income and miscellaneous income is that you can qualify for a 1,000 tax-free exempt amount which means that you could earn £1,000 from these activities and that would be exempt from income tax and National Insurance and if you're loss making in these activities you can carry forward that loss to Future periods but to make sure that you are claiming the correct reliefs that are most advantageous for your situation you would need to consult a Tax Advisor because hmrc have told us that most individuals will be subject to capital gains tax on their crypto assets that's what we're going to cover off next you need to pay capital gains tax when you dispose of a crypto asset and there are four scenarios when a disposal will have occurred the first one is if you sell your crypto asset for cash the second one is when you swap one cryptocurrency for another the third one is if you use a crypto asset to pay for goods and services and the fourth one is if you give your crypto asset to somebody other than your spouse or civil partner if any of these situations apply then you will need to calculate your gain or loss on disposal so let's work through a simplified example so you can see how you would do the calculation so let's say that Jass has 100,000 litecoins that he bought for £2 each so £200,000 in total he decides to sell £10,000 coins for a market value of £3 each so he will receive £30,000 and his sale will incur a transaction fee of 0.1% on those 10,000 coins so that will be 10 coins his consideration will be £30,000 and then his allowable costs will first of all be the purchase price of those 10,000 coins at2 each so that's £20,000 and his transaction fees will also be an allowable cost so that's 10 coins at £3 each so that's £30 so his gain will be 9,970 but Jas can make use of his £3,000 capital gains tax annual exemption and that has just reduced from £6,000 so his final gain will be £ 6,970 if Jas is a basic rate taxpayer then he will be subject to capital gains tax at 10% and so he will pay £ 697 of capital gains tax if Jas is a higher or additional rate taxpayer then he will pay 20% capital gains tax and so his final Li ility will be £ 1,394 in reality there will be other complexities to consider for example if Jas holds other fundable s that he acquired on different dates then he will need to apply pooling rules which means that he would need to work out a pulled cost for each of his fungible s and then apply that to the calculation that we just did plus the transaction fee of of £30 would be considered to be a disposal in its own right because he's effectively disposing of 10 coins as part of his transaction so there will be another layer to the calculation that we just did and just to note that from the 2425 tax year crypto assets will have their own specific boxes on your self assessment tax return so it will be a bit easier to report any gains or losses on your crypto Assets Now let's talk about how to save tax on crypto first of all the capital gains tax into spouse exemption means that if you live with your spouse or civil partner you can transfer assets to them on a No Gain No loss basis that means that you could transfer crypto assets to them that would otherwise give rise to a £3,000 gain and then when they receive that crypto asset taxfree they could sell it make the £3,000 gain and then use all of their capital gains tax annual exemption to fully shelter that gain you could then dispose of crypto assets that give rise to a £3,000 gain as well and make the most of your annual exemption so that £6,000 worth of gains are sheltered from capital gains tax secondly make sure that you are claiming all costs on any disposals HMR say that various costs including transaction fees costs of drawing up a contract and marketing and advertising costs for the sale of your crypto assets are all allowable for capital gains tax purposes so by deducting all the costs that you are allowed to deduct you can legally make sure that you're paying as little tax as possible on your crypto disposals thirdly is capital losses so even if your crypto assets are loss making this year it may still be worth reporting those losses to hmrc so that you can carry them forward to Future periods and set them off against future gains if you think that you've underpaid any taxes from previous periods on your crypto assets then you can use hmrc's voluntary disclosure service to let them know but I would suggest speaking with a tax advisor to make sure that you're not underpaying or overpaying any taxes please like this video if you found it helpful subscribe to the channel if you haven't already and there won't be a video next week so I will see you in 2 weeks