You may have noticed that, yesterday, the British government announced their guidelines on taxation for individuals holding and receiving crypto-assets in the United Kingdom. As you can imagine the document they have released is a considerably lengthy one and is one which, to be honest, doesn’t sit very well with me. I may have my understanding of the document incorrect, that is always a possibility, but from my understanding it seems the British government will be taxing crypto-assets dependent on how a holder receives them.
According to the newly released document individuals who receive cryptocurrency as a payment mechanism will be required to pay income tax on their assets using the pound sterling value of the asset at the time of receipt. This means that you could get paid £1000 in, for example, Ethereum and then watch it drop in value to £500 but still be required to pay tax as if it was worth the initial £1000. This income tax structure is not being limited to payment for services, it is also being applied to income received for mining and airdrops. This could obviously put a lot of people in a sticky situation when considering the volatile nature of cryptocurrencies.
How to Avoid an Un-payable Tax Bill
By doing as I suggest above you will be able to ensure that you are able to pay your tax bill regardless of what the market does. This is important as the UK government doesn’t care if you cant afford your bills, they want their money (unless you’re Starbucks, Google or Amazon, of course) and they will hunt you down for it.
What About Investments?
Again, this will prevent any un-payable tax bills when they are due and will leave you in a better standing come the end of the year.