HMRC Rule on Tokens Received from Mining
Hence, registering and sending a Self Assessment tax return (in GBP) will be necessary, unless you received:
- Crypto assets valued under £1,000.
- Other untaxed income less than £2,500.
Note: Income Tax is not due on tokens when you ‘buy’ them. But, another section explains how to check if you need to pay tax when you sell cryptoassets (e.g. on a realised gain).
Cryptoassets Received as Employment Income
Does an employer pay you with cryptoasset exchange tokens (cryptocurrencies)? If so, HMRC classifies the value of these assets as ‘money’s worth’.
As a result, you need to check whether tokens you receive through employment are ‘readily convertible assets’ (e.g. you can ‘easily’ exchange them for cash). Use the HMRC Cryptoasset Manual link below.
Income Classed as a Readily Convertible Asset
Employers must pay Income Tax and National Insurance contributions (NIC) through the UK PAYE system before paying their employees.
So, what happens if your employer pays you in tokens (cryptocurrency)? In this case, they will pay your Income Tax and NIC based on estimated values – then deduct tax and contributions from other wages you receive during that particular period.
There may be times where an employer will pay Income Tax on behalf of their employee, such as when (either):
- An employee is paid ‘only’ in cryptoasset exchange tokens.
- They are unable to deduct the full amount due to the employee from their other wages.
Important: Employees should reimburse their employer no later than ninety (90) days of the end of the current tax year when they have paid it for them.
Income Not Classed as a Readily Convertible Asset
You must pay your own Income Tax if your employer does not pay it through ‘Pay As You Earn’ (PAYE). As a rule, you will need to complete a Self Assessment tax return and pay the amount due in pound sterling.
Keeping Records after Receiving Cryptoassets
You need to keep separate and accurate records of any tokens you receive through employment and from mining activities. The details and information you must keep, includes:
- Bank statements showing the relevant payment transactions.
- How many tokens you have in total and the value in pound sterling (GBP).
- Token type (e.g. altcoins, Bitcoin), how many you received, and the date you got them.
- When you ‘disposed of’ or sold the tokens. Another section explains more about Capital Gains Tax when you sell crypto assets in the United Kingdom.
Important: Other records you should keep to help avoid internet scams include a secure wallet address. HMRC may want to see the records if they decide to carry out a compliance check (e.g. to inspect your tax affairs).
Related Help Guides
- List of tax codes and what they mean.
- Keeping your pay and tax records for Self Assessment.
- HM Revenue and Customs Crypto Assets Manual.
Note: This short video [1:13 seconds] presented by HMRC explains more about the tax calculation (the P800) letter used with under or over payments of taxes in the United Kingdom.