The Salary Calculator

The current state of crypto

by Madaline Dunn

Crypto is in a constant state of flux. In 2022 we witnessed the infamous crypto-crash, it’s now in the midst of regulatory changes, and two of the biggest crypto companies are currently facing lawsuits. With so much confusion and incoming crackdowns, it makes sense that you might be having questions about what’s happening and how the crypto landscape is changing.

This week, at The Salary Calculator, we’ll walk you through:

• How the current crypto market is faring,
• Legislative changes and regulated crypto activity
• What’s happening with Britcoin
• How to stay as safe as possible when trading

How is crypto faring?

There are currently 23,171 cryptocurrency projects in the crypto market amounting to £954 billion, with the leading three being Bitcoin (BTC), Ethereum (ETH), and Tether (USDT). The former is the original cryptocurrency and the world’s largest, with a 1 Bitcoin worth £24,019.77, up from £18,929 in August last year. However, as highlighted, despite this, the crash saw it fall from its all-time high of £69,000 the year prior to this much lower figure.

Ethereum, similarly, has fallen meteorically; last year in May, the cryptocurrency fell over 20 per cent in 24 hours – at the end of June, it was worth £1,481, with a market cap of £178.1 billion.

Tether, meanwhile, lost USD 20 billion in 2022, but according to the latest reports, it has now recovered this, surpassing USD 83.2 billion in market capitalisation.

However, for the most part, trust has not been restored in crypto, and experts say that the road to recovery will be long. Indeed, considering the continued volatility of the currency, experts say that if you choose to invest in crypto, keep investment minimal and only weigh in money that you can afford to lose. It’s likely last year you will have seen stories of investors losing their entire life savings after betting on crypto – and it’s important to remember that even the most tech-savvy individuals are at risk of losing money, because the market is extremely speculative.

Legislative changes regulating activity and risk

There have been lots of regulatory shifts related to crypto in recent years, and just recently, the UK parliament moved one step further to recognising crypto as a regulated activity in the UK, voting the Financial Services and Markets Bill (FSMB) through to the House of Lords (HoL).

The legislation contains provisions to:

• Include stablecoins under the country’s payments rules,
• Include crypto as a regulated activity, and
• Supervise crypto promotions.

According to reports, new regulations could be introduced within 12 months.

Further to this, the FCA has also introduced new rules for marketing cryptoassets, whereby financial promotions on cryptoassets will only be permitted if they are “made or approved” by a firm with certain status with the FCA2. Further, if a firm promotes crypto, it must have clear risk warnings so that adverts are “clear, fair and not misleading.

There were a huge amount of hacks on crypto in 2022, whereby hackers stole a record $3.8 billion worth of cryptocurrency globally last year; 2022 was subsequently identified as the biggest ever year for hacking. And, indeed, this should be a warning to consumers who should be aware that crypto is still an environmental that comes with serious risk.

Speaking about the potential risk that consumers expose themselves to when dealing with crypto, Sheldon Mills, Executive Director, Consumers and Competition, said: “It is up to people to decide whether they buy crypto. But research shows many regret making a hasty decision. Our rules give people the time and the right risk warnings to make an informed choice.”

Further, Mills said that consumers should “still be aware” that crypto remains largely unregulated and high risk, and that those who invest should be prepared to “lose all their money.”

Interestingly, despite this ongoing warning, last year, the FCA found that almost one in 10 people surveyed owned cryptocurrencies in 2022.

Further, the International Monetary Fund (IMF) has even recently gone back on its advice that countries should ban crypto, and is now saying that outright bans “may not be effective in the long run.”

Is Britcoin advancing?

There’s been a lot of hype around Britcoin; some have said it will bring legitimacy to crypto, while others have criticised the proposal to introduce the digital currency, claiming that it will be detrimental to the UK economy and people’s privacy.

The House of Lords Economic Affairs Committee, for example, found that the introduction would see “a lot of risk” with “very little” reward. Further, it outlined that if Britcoin allowed anonymous transactions, it would be open to the same kind of criminal risks as the current cryptocurrencies, but if it introduced potential ‘safeguards ‘against this, privacy would be at risk. Indeed, a centralised digital pound would mean that all spending would be recorded.

Regardless of the criticisms, it appears that Britcoin is pushing ahead and projections are that it could arrive by the end of the decade. Indeed, Project Rosalind, a joint trial run by The Bank for International Settlements and the Bank of England, was trialling the best way an Application Programming Interface (API) could be implemented in central bank digital currency (CBDC) for retail transactions. This trial recently concluded, with it reportedly showing the potential CBDCs have for introducing “programmability” to money and it looks like things will be progressing further.

Things to bear in mind when trading

While it’s important to enter trading with the knowledge that it is inherently risky, some of the following tips can help you trade a little more safely and is advise that should always apply to cryptotrading.

1.) Research is always your friend. Whether you’re looking for a cryptocurrency exchange to trade on or deciding which cryptocurrency you’ll proceed with – you need to research in depth. Make sure to choose an exchange with high-security features. Likewise, with cryptocurrency itself, review reputation, risk and track record.

2.) As outlined above, crypto is prone to being hacked, so you need to keep your money secure. One of the best ways to do this is to use a crypto wallet. Here, either get a digital wallet on your computer’s hard drive or a physical hardware wallet. This is also key for ensuring you don’t misplace your crypto – as many as 1 in 5 Bitcoins have been misplaced.

3.) Get serious about security. Say goodbye to easy-to-guess passwords and use a password manager to help you store your highly-secure passwords.

Tags: Britcoin, cryptoassets, cryptocurrency, investment

Investing in financially challenging times 

by Madaline Dunn

When each day the headlines regarding the economy are worse than the last, warnings of skyrocketing energy prices, excessive food and petrol costs, and forecasts that it’s only going to get worse, you may be counting every penny. Investing is likely to be the last thing on your mind when juggling your finances in this challenging financial crisis.

That’s what the research shows, too. According to one study, 24% have stopped contributing to investments and savings because of the cost of living crisis. Meanwhile, 14.1% of British households don’t hold any investment, even though most have at least six months’ worth of “essential spending cash.”

That said, experts say that it’s perhaps not the best plan to abandon ship and that continuing to invest might actually benefit you in the long run.

At The Salary Calculator, we’ll walk you through:

• Whether not you should continue investing during the cost of living crisis
• What are the risks and how can you safeguard yourself
• How you should invest

Should you invest?

People are indeed becoming more cautious around investment, however, Becky O’Connor, head of pensions and savings at Interactive Investor says some are still making regular contributions. However, O’Connor explained that it’s “understandable” that people are more reluctant to part ways with their money and expose it to risk, “given the current outlook for household budgets” that people are “looking to make cutbacks wherever they can.”

As a result, research from Scottish Friendly reveals that investment levels have fallen to their lowest in three years in the second quarter of the year. This figure stands alongside the total value of new adult investment ISA policies, which has dropped 6%.

Explaining the reason for this decline, Simon Phillips, an independent financial adviser and partner at Devon-based Continuum, said: “Cash is not making anything due to inflation, but many people tend to think that if the economy is struggling or the stockmarket is volatile, that they should cut back on stocks and shares and keep money safe in cash.” However, Phillips argues that from a financial point of view, that approach is the “worst thing you can do” because it means you will miss out on investing at “what could be a good time from an equity standpoint.”

Sarah Coles echoes similar sentiments when discussing future savings:: “If you do cut back on saving for the future when money is tight, it’s worth considering when you’ll be able to bump contributions back up. A few months away from a pension isn’t going to make a dramatic difference to your retirement, but if it drags on and you don’t have a plan for beefing payments up again when your finances ease, then you could end up with a horrible surprise in retirement.”

According to the experts, if you have built up a robust emergency fund to ensure that you have security when the hard times come, it could be beneficial for you to explore investment.

What are the risks and how should you safeguard yourself?

One of the main barriers to people diving into the world of investment is that many don’t feel confident exploring that space. For many, there’s the misconception that investment is only for people with lots of money. This perhaps explains why 46% of people don’t feel confident when it comes to investing.

It is certainly true that investment comes with risks. After all, if the stock markets blossom, so will the value of your investment, and vice versa, if the markets crash, your investments could take a hit. Not all investments are created equal though, and some pose more risks than others. According to the experts, government bonds are considered less risky, but will return less profit, meanwhile, shares are riskier, as are trusts and cryptocurrency, the latter of which is becoming increasingly popular, but also incredibly volatile.

When it comes to minimising risk, diversification is an essential component, while Barclays recommends investing globally to get access to a range of economies. It’s also suggested that when thinking about investment, you consider the long-term implications and you only invest funds you don’t need across the next five years. It’s also important that you review your investment portfolio regularly to make sure that you’re meeting your goals and not exposing yourself to risk.

Tips for how you should invest?

When considering investing, it’s important that you put the research in, and make sure you pick the right options for you, your financial situation, and take into account the level of risk you are willing to expose yourself to.

In a cost of living crisis, some recommend that investing in defensive stocks, which include “essential goods and services,” can be a good option, as they often outperform the market, when there are financially difficult times. Likewise, dividend stocks can also generate funds quickly.

Guidance from finance experts also suggests that you should drip-feed your money into investments, which can reportedly help you benefit from pound-cost averaging. It’s also important to note that when the economy looks grim, you are also more likely to be able to buy low-priced stocks.

Tags: cost of living crisis, Economy, investments, savings

Cryptocurrency: how to report and pay the right amount of tax

by Admin

Article by GoSimpleTax

In October 2021, HMRC was reportedly planning to send out “nudge letters” to holders of cryptocurrency (also called cryptoassets or just crypto), reminding them to check that they were reporting correctly and paying the required amount of tax.

Obviously, HMRC wants to prevent tax underpayment by the 2.3m people in the UK now believed to have crypto holdings. You may be among them and want to be sure that you’re reporting properly and paying the right amount of tax. Or you could be thinking about investing in cryptocurrency and want to know what your obligations would be regarding reporting and paying tax.

This guide explains:

• What cryptoassets and cryptocurrency are.
• When cryptocurrency is subject to Capital Gains Tax.
• When cryptocurrency is subject to Income Tax.
• What records you need to keep for tax purposes.
• How to report crypto gains or income.

What are cryptoassets/cryptocurrency?

HMRC defines cryptocurrency/cryptoassets as: “Cryptographically secured digital representations of value or contractual rights that can be transferred, stored and traded electronically.”

Chances are you’ve heard of Bitcoin, the world’s best-known and most widely held cryptocurrency. More than 60% of UK cryptocurrency investors have Bitcoin holdings, but other examples include Ether, Litecoin and Ripple.

Cryptocurrencies are digital assets, they’re not physical currency. You can’t buy things in the shops with them and they have no inherent value, they’re worth whatever someone is willing to pay for them. A cryptotoken is a denomination of a particular cryptocurrency and they each have different values. As with other assets, cryptocurrency value can go up or down.

Cryptocurrency is bought and sold via secure peer-to-peer online networks or exchanges. According to HMRC, the tax treatment of cryptocurrency depends on its nature and use. Basically, if you’re given crypto or earn income from crypto trading, it can be subject to Income Tax. If you dispose of crypto by selling, exchanging or giving it away, it can be subject to Capital Gains Tax.

When is cryptocurrency subject to Capital Gains Tax?

Obviously, people invest in cryptocurrency hoping that its value will increase over time. If it does, you make a gain, that’s why Capital Gains Tax can be payable if you dispose of cryptocurrency tokens by:

• selling them
• exchanging them for other cryptoassets
• using them to pay for good or services
• giving them away (unless it’s to your spouse or partner) or
• donating them to charity.

Your gain is the difference between how much you bought the crypto for (including any transaction fees) and sold it for. If someone gives you cryptocurrency tokens upon which you later need to pay tax, to work out your gain, you must find out their market value when they became yours.

How much Capital Gains Tax is payable on cryptocurrency?

After your total taxable gains go over the Capital Gains Tax tax-free allowance threshold – £12,300 for the 2021-22 tax year – you’ll be taxed as follows:

• If you’re a basic rate Income Tax payer (ie with taxable earnings of £12,571-£50,270 a year) you’ll pay Capital Gains Tax of 10%, then  20% on gains that take you above £50,270 in taxable earnings.
• If you’re a higher or additional rate Income Tax payer (ie with taxable earnings of more than £50,270 a year) you’ll pay 20% CGT on your crypto gains over and above the CGT threshold.

To find out whether Capital Gains Tax is payable after selling cryptocurrency, you need to calculate your gain for each transaction.

Some allowable expenses are deductable for Capital Gains Tax, including (according to HMRC):

• “transaction fees paid before the transaction is added to a blockchain”
• “advertising for a buyer or seller”
• “drawing up a contract for the transaction”
• “making a valuation so you can work out your gain for that transaction”
• “a proportion of the pooled cost of your tokens when working out your gain”.

Need to know!

• Capital Gains Tax is obviously not due on crypto losses, but you can use these to reduce other crypto gains and any tax liability, providing you first report them to HMRC. Losses aren’t capped.

How to report and pay Capital Gains Tax on cryptocurrency

To report and pay Capital Gains Tax on cryptocurrency you can either complete a Self Assessment tax return following the end of the tax year or use the real-time Capital Gains Tax service to report and pay straight away.

You must keep separate records for each cryptocurrency transaction detailing:

• token type
• disposal date
• number of tokens disposed of
• tokens remaining
• value of the tokens in pound sterling
• bank statements and wallet addresses
• pooled costs before and after you disposed of them.

Need to know!

• HMRC can ask to inspect your cryptocurrency records if it decides to carry out a compliance

When is Income Tax rather than CGT payable on cryptocurrency?

Income Tax and National Insurance contributions (NICs) can be payable on cryptocurrency if your employer gives you them as a non-cash bonus or benefit (this could apply to those who mix employment with self-employment). If you need to pay Income Tax on income from crypto for this or other reasons, you’ll need to register for Self Assessment, if you’re not already registered.

If you occasionally dabble in crypto, you’ll probably only have to pay Capital Gains Tax on disposal. However, if you trade regularly, HMRC will consider you to be a crypto trader and you’ll need to report your income via Self Assessment and pay any Income Tax and National Insurance that’s due.

If you’ve paid Income Tax on crypto, Capital Gains Tax isn’t payable unless you later dispose of your tokens, when CGT will be due on the gain made since you reported for Income Tax.

Many cryptoassets are traded on exchanges that don’t use pounds sterling. If so, the value of any gain or loss must be converted into pounds sterling when you’re completing your Self-Assessment tax return. You’ll need to use supplementary page SA108 to detail crypto capital gains/income and losses claimed within your SA100 tax return.

Need to know!

• Fail to report cryptocurrency gains or income to HMRC and it can lead to penalties, while you’ll still have to pay tax you owe plus interest.

More information

Visit government website GOV.uk to download HMRC’s Cryptoassets Manual. It sets out the tax rules for both individuals and businesses that invest in cryptocurrency.

About GoSimpleTax

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The software submits directly to HMRC and is the solution for the self-employed, sole traders and anyone with income outside of PAYE to file their self-assessment giving hints and tips on savings along the way.

GoSimpleTax does all the calculations for you saving you ££’s on accountancy fees. Available on desktop or mobile application.

Tags: capital gains, capital gains tax, cryptocurrency, investment, savings

Cryptocurrency: Facts, figures and potential dangers

by Madaline Dunn

These days, it feels like talk of cryptocurrency is everywhere. It can be easy to think that cryptocurrency is a straightforward investment, with adverts saying “It’s time to buy” and “Be your own bank.” However, cryptocurrency is a lot more complicated than one might first think, and as with any investment, it’s important to be aware of the risks and dangers.

At The Salary Calculator, we’ll guide you through:

• What cryptocurrency is
• What Britcoin is, and what the Bank of England’s consultation means
• Why you should be wary of cryptocurrency
• How to keep your wits about you

What is cryptocurrency?

Cryptocurrency is a form of digital currency which is typically decentralised and with which people can use to make transactions and invest. However, what makes it unique is that it is secured by cryptography, meaning that transactions are entirely untraceable, and you don’t need a third party, like a bank or credit card company, to oversee purchases.

The most well-known form of cryptocurrency is Bitcoin which was created back in 2009 and uses peer-to-peer technology, allowing users to buy or sell directly with another user. It uses blockchain technology, which is also known as Distributed Ledger Technology (DLT).

As of 2021, there are reportedly 300 million crypto users across the globe.

What is Britcoin?

The Bank of England has reportedly launched a consultation into Britcoin, Britain’s own digital currency. That said, it would not technically be a cryptocurrency because, unlike Bitcoin, it would be issued by the bank.

As a result, Britcoin would be a Central Bank Digital Currency (CBDC), and, as outlined by the Bank of England, £10 of Britcoin would hold the same value as a £10 note.

Speaking about the consultation, the bank’s deputy governor for financial stability, Jon Cunliffe, said: “The plan to publish a consultation next year on CBDC is a crucial step in our policy development, especially as we further our thinking on the pressing issues at hand.”

“What it will do is provide a platform for interested parties and relevant groups to engage with the key questions on the merits of CBDC, and whether the public sector should advance to a development phase.”

England isn’t the first place to be exploring the possibilities of this kind of digital currency; the Bahamas has the Sand Dollar, while China launched pilots of CBDC in 2020.

According to the Bank of England, there will be no launch before 2025.

Why you should be wary of cryptocurrency

There are a number of reasons why you should be wary of cryptocurrency. One key aspect of cryptocurrency is that it is incredibly volatile. While, on the 10th November, Bitcoin reached an all-time high reaching above $68,000, on 16th November, there was a market-wide crash, whereby the overall crypto market dropped by over $200 billion to approximately $2.6 trillion.

It’s also important to note that cryptocurrencies are unregulated, which means that there’s no watchdog or regulator to oversee the security of transactions and guarantee safety and security – which is another issue.

Although cryptocurrency is decentralised, meaning you own your own money, crypto exchanges and hot wallets (cryptocurrency wallets) can be hacked, and hacks happen all the time. This is why, when trading, it’s important to have a ‘cold wallet,’ too, which can’t be accessed through the internet.

Cryptocurrency ads and keeping your wits about you

You may have found yourself noticing more and more advertisements for cryptocurrency. With these advertisements becoming more mainstream, appearing on TfL buses and trains, one may believe these are regulated, conventional and safe forms of investment.

It’s for this exact reason that the Advertising Standards Authority (ASA) banned advertisement from crypto exchange service, Luno, which told people it was “time to buy.” Explaining the reasoning behind its decision, the ASA said: “We understood that bitcoin investment was complex, volatile, and could expose investors to losses and considered that stood in contrast to the impression given by the ad, that investment was simple and conventional.”

Adding: “We concluded that the ad irresponsibly suggested that engaging in bitcoin investment through Luno was straightforward and easy, particularly given that the audience it addressed.”

Now, further appeals for bans of crypto ads have been made, especially in relation to TfL posters advertising Floki Inu, another crypto product. Advertisements for this product ran for three weeks, and TfL has admitted that they do not know who is behind the funding of the posters.

If you decide you want to take things further with cryptocurrency, here are some tips on how to keep safe:

• Research, research, and research some more. Keep up-to-date with cryptocurrency exchanges, and even reach out to experienced investors for guidance and advice.
• Diversify. Putting all your money into cryptocurrency, especially considering how volatile it is, is potentially very dangerous. Make sure you don’t get caught out.
• Look into different cryptocurrency wallets to ensure your investments and purchases are safe or as safe as they can be.

Tags: Britcoin, cryptocurrency, Currency, Economy, investment

Savings and investment help from Hargreaves Lansdown

by Admin

If you are trying to save for your retirement, or just for a rainy day, it can be difficult to understand what your options are and what is best for you. Should you get an ISA (Individual Savings Account), or a SIPP (Self Invested Personal Pension)? What are the pros and cons of each, and why might you open a savings account instead?

Fortunately, Hargreaves Lansdown have created a series of guides intended to help you make the most of your savings – the guides are free to download, all they ask is that you provide some registration details. If you would like to know more about investing for the future and the tax benefits of doing so, try their introduction to SIPPs, or the beginner’s guide to ISAs.

Also of interest to readers of The Salary Calculator might be the calculators on Hargreaves Lansdown’s site which can help you plan for your retirement.

Tags: calculators, Hargreaves Lansdown, investments, ISAs, pension, personal pension, savings, SIPPs