When the first cryptocurrencies emerged, it was a niche sector that only a handful of enthusiasts dabbled in. The Bitcoin craze managed to change that state seemingly overnight with the meteoric rise in the valuation of the coin. Suddenly, the blockchain and the idea of cryptocurrencies became a mainstream phenomenon. With people from all walks of life being drawn to the seemingly endless possibilities. For gains offered by this new technology. Cryptocurrency accountant: When is it time to get one?
The success of Ethereum and especially Dogecoin, a cryptocurrency that was as joke crypto but suddenly became something very, very real. Solidified the notion and generated even more attention. With its increasing appeal that spanned across borders and continents and the establishment of what can be its own industry sector. It was only a matter of time before governments would step in and try to take a piece of the pie.
On that account, now may be the right time to consider turning to a professional. Some accountant firms have started offering specialized cryptocurrency services. Keep in mind that the laws regarding the taxing of cryptocurrencies will vary from country to country. So you should turn to a local expert, such as a UK cryptocurrency accountant if you are operating in the UK.
What was once a free and new market where people were able to keep all of the gains they made? So, is now slowly being present by many countries into their tax systems. Individual crypto enthusiasts may find navigating all of the newly enacted taxation laws quite challenging. Not only would it take a considerable amount of time to get up with the regulations. But you would need to constantly pay attention to any future changes. After all, the crypto sector is notorious for its volatility. So, naturally, the laws governing it would likely be prone to undergo swift corrections and modifications as well.
We mention the UK specifically because early in 2021. It consolidated its previous two separate guidelines on crypto taxation, one for individuals and one for businesses. Into a singular ‘crypto manual.’ Indeed, the fear of many early crypto adopters is now becoming a reality. With governments starting to pass regulations and tax laws about the various activities within the crypto sector.
Know What You Owe: Cryptocurrency Accountant Time
All aspects of the crypto sector are falling under new taxation laws. To avoid any unpleasant surprises in the future, it is vital to determine where you stand under the new rules. How to calculate what you owe, and how to avoid paying any unnecessary taxes. This is equally valid no matter your particular involvement in the crypto sector. You can be mining for new coins. Trading them in the same manner as stocks, or investing and keeping your holdings. The first step in this process under UK’s new laws is to determine if your crypto involvement. So, would be classified as a business or an individual activity. There are a couple of factors to consider. The time you hold on to the crypto instruments, the number and frequency of transactions, the level of risk. The type of organization, and commerciality.
Cryptocurrency Accountant Time: Disposal and Taxes
If your crypto activity is a business under the enforced criteria. Then all income will be trading profits and, as a result, subject to income tax. Fees or rewards to staking activity in the sector will also add as well as any value gained. From the disposal of cryptocurrencies. What is disposal when it comes to capital gains purposes, though?
Individuals who hold cryptocurrency as an investment do not owe capital gains tax until they decide to dispose of it. Under the HM Revenue & Customs guidance, disposal occurs in four specific scenarios. Selling crypto assets for money, exchanging them for other cryptocurrencies. Using them to pay for goods or services, and deciding to give away crypto assets to another person or organization or cryptocurrency accountant.
Recognizing all of the intricacies of emerging tax laws that are trying to regulate a new and unprecedented occurrence such as the crypto sector can be tricky. Many small details may not be correct for or share in the text of the regulations. Jeaving crypto enthusiasts just trying to figure out if they owe taxes scratching their heads. That is why consulting with a professional as soon as possible could prove to be invaluable. UK crypto enthusiasts should remember that they will most likely need to pay capital gains taxes by the end of January 2022.