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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

Income, Expenses and tax submission all in one.

GoSimpleTax will provide you with tips that could save you money on allowances and expenses you might have missed.

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

A guide to house prices across the UK

by Madaline Dunn

House hunting is exciting and often symbolises a new start, and adventure. That said, it can be somewhat overwhelming reviewing house prices, especially considering that global house prices are rising at the fastest pace since 2005.

According to Halifax, house prices shot up by 10.3% over the last year, with an increase to £287,440 on average!

But, don’t worry, at The Salary Calculator, we’ll walk you through:

• Some of the housing market trends right now
• Whether now is a good time to buy a house
• Where the cheapest house prices are
• Where the most expensive house prices are located

What are some of the housing market trends right now?

For those looking to break into the housing market in the UK, there are a few things you should know. In August, house prices jumped 7.1%, a record high, with more demand for greater space and a trend towards more home-working pinned as the reasons behind increased buyer activity.

In relation to this, following the pandemic, more and more people are looking to move out of cities, and now there is reportedly greater demand for rural areas. A survey from Royal London revealed that when movers were asked about their ideal living locations, 46% of Londoners said rural areas, while this figure was 45% in Manchester and 42% in Liverpool.

Andrew Asaam of Halifax said: “It’s clear from speaking to our mortgage customers that many have prioritised space over location as a result of more time spent at home over the last year and a half. We’ve seen evidence of this in areas right across Britain, with house price growth in the vast majority of cities now being outstripped by increases in their surrounding areas.”

Is now a good time to buy?

According to the experts, house prices are pretty pricey right now, and there’s been a month-on-month increase in price. Nationwide House Price Index found that in August 2021, the average house price stood at £248,857, which was 2.1% higher than in July. Demand is also high, meaning there’s a bit more competition.

Robert Gardner, Nationwide’s Chief Economist, says demand is likely to remain solid: “Consumer confidence has rebounded in recent months while borrowing costs remain low. This, combined with the lack of supply on the market, suggests continued support for house prices.”

Meanwhile, speaking to Woman and Home, Chris Salmon, a property expert said that a large price drop is unlikely to happen in the next few months: “For the most part, they will remain largely the same as they are now. Although the Stamp Duty Holiday fully ends at the end of September, only a small amount of properties are affected by that, not enough to see a significant drop in house prices.”

Where are the cheapest house prices?

If you look at the UK by region, some of the cheapest places to buy a house are:

• Scotland: Average house price: £206,359
• Yorkshire and The Humber: Average house price: £207,106
• North East: Average house price: £213,091
• North West: Average house price: £228,307
• East Midlands: Average house price: £250,946

Meanwhile, by city, some of the least cheapest spots to buy a house are:

• Hull: Average house price: £156,424
• Carlisle: Average house price: £163,232
• Bradford: Average house price: £164,410,
• Sunderland: Average house price: £179,567
• Inverness: Average house price:£191,840
• Glasgow: Average house price: £196,625

Where are the most expensive house prices?

In the UK, buying in some of the most expensive regions will cost you an arm and a leg. The South West is now the most expensive region, and experts have largely put this down to the second home market surging.

Across the UK, some of the most expensive regions include:

• South West: Average house price: £430,488
• East: Average house price: £385,420
• South East: Average house price: £441,246
• London: Average house price: £706,267
• West Midlands: Average house price: £264,017

These days there are actually locations in the UK that outdo London when it comes to house prices. Winchester, in particular, was found to be one of the most expensive places to live. There, the average property costs 14 times the average salary. Oxford is not far behind, with a price-to-earnings ratio of 12.4.

The following locations are the most expensive in the UK:

• Winchester: Average house price:£630,432
• St Albans: Average house price: £604,423
• London: Average house price: £564,695
• Oxford: Average house price: £486,928
• Cambridge: Average house price: £482,300

Tags: Economy, house prices, houses, savings

Social care tax proposed from April 2022

by Admin

The government announced yesterday plans to introduce new social care tax, intended to help reduce the costs incurred when a person goes into care. If the bill passes parliament, this will mean be an increase in National Insurance contributions of 1.25 percentage points from April 2022, to be replaced by a separate tax of the same amount from April 2023. The benefit of this additional tax, in England at least, is that care costs will be capped at £86,000 (less if you don’t have that much in savings / assets). Scotland, Wales and Northern Ireland set their own social care policies, but will receive additional revenue from the tax generated.

The plan has drawn criticism from many who see it is a tax paid by low- and middle-income employees to subsidise wealthy retirees. It also appears to be a break of a manifesto pledge not to raise income tax, National Insurance or VAT – the justification for which, put forward by the government, has been that the pandemic has changed things.

This BBC article has a clear summary of the changes in more detail, as well as a chart showing how much extra tax you’ll pay depending on how much you earn. The bill still needs to pass parliament, but when this and other changes from April 2022 are confirmed, The Salary Calculator will be updated with the latest rates so that you can see what a difference it will make to your take-home pay.

Tags: coronavirus, covid-19, HMRC, income tax, Jobs, national insurance, Pay As You Earn, social care, tax rates

The best credit card deals out there in 2021

by Madaline Dunn

When it comes to the world of credit cards, there are lots of benefits. A credit card helps boost your credit rating, offers you protection and freebies, and gives you some financial wriggle room.

That said, it can be hard to know where to start, and often people have lots of burning questions that need answering. It’s also important to stay informed about charges and fees.

At The Salary Calculator, we’ll make sure that you’re up-to-date with all the latest credit card deals out there in 2021. Keep reading to find out more.

Reasons you could benefit from a credit card

To some, credit cards can seem intimidating, and many believe it only leads to debt, but they can be helpful in some circumstances. Credit cards can help you with your finances and assist you with building a good credit report. If your credit is in the red, and you’re looking to make a big investment like a house or car, a credit card can push it into the green.

Some credit cards also enable free borrowing and purchase protection, as well as offering reward deals so that you can earn free money too.

That said, it’s important to be aware that you shouldn’t rely on credit cards to borrow money, especially if you don’t have the funds for repayments. Plus, when the interest-free period ends, you can be faced with some pretty significant charges. Credit cards also have varying levels of APR, which refers to the rate at which you’ll be charged for borrowing. So, make sure you don’t get caught out by the small print!

Santander All in One Credit Card

Arguably, the biggest plus of this credit card offer is that cardholders can benefit from 26 months interest-free on balance transfers. Other benefits include a 0.5% cashback on all purchases and no foreign transaction fees.

However, it’s not all sunshine and rainbows, and the card does have a £3 monthly charge, which works out to £36 a year. Another disadvantage of this card is that you will also be charged transaction fees if you withdraw money – interest applies here too. Moreover, it has an APR of 23.7%.

To be eligible for this card, you must have an income of at least £7,500 a year and be 18 or over.

Aqua Advance Credit Card

This card is excellent for people who are looking to build credit and requires no credit rating. It has an initial APR of 34.9%, but customers who stick with this card will be rewarded through staggered APR reduction. After 12 months, if you keep up with payments and stay within your limit, your rate could be reduced by 5% each year. This means that the APR can go as low as 19.9%.

This card also offers access to the Aqua Credit Checker, allowing you to view your credit rating and its improvement.

Other benefits include credit limits of between £250-£1,200 and no extra charges for purchasing abroad.

To be eligible for this card, you must fulfil a specific criterion. Applicants must be over 18 with a permanent address. Additionally, you must have a current UK bank or building society account and must not have been registered as bankrupt in the last 18 months. Equally, you cannot have any ongoing bankruptcy proceedings against you.

Finally, eligibility also depends on not receiving a County Court Judgement (CCJ) in the past 12 months. You also cannot already have an Aqua card or have an Aqua, marbles, opus, Fluid card taken out in the last 12 months.

American Express Platinum Cashback Everyday Credit Card 

This is a great card for those looking to get a little more bang for their buck with no annual fee. It offers a 5% cashback on all purchases up to £100 for the first three months. This does, however, decrease over time.

That said, it’s important to note that you need to spend £3000 or more to access cashback offers, and unfortunately, it’s not available for those with a bad credit history. It has an APR of 22.2%,

To be a successful applicant for this card, you must be aged 18 or over and have a clean slate regarding debt. Applicants must also have a permanent UK address and a current UK bank or building society account.

M&S Shopping Plus Credit Card

For those looking for a credit card to spread the cost of large purchases, this is the perfect one for you. With no annual fee, it also boasts a 20-month interest-free period of new purchases. That’s right, no interest at all for 20 months! Accompanying this, the card also offers cardholders an 18-month interest-free period for balance transfers. That said, this only applies within the first 90 days. Also, remember if you opt for this card, you must pay off your balance before the interest-free period ends.

As with everything, there are pros and cons to this card, and the reward points you earn through this card are only available in the form of M&S vouchers. So, this isn’t necessarily a great deal for everyone. It also has an APR of 21.9%.

Eligibility for this card requires that applicants are over the age of 18 and UK residents.

Barclaycard Rewards Credit Card

This is a great travel card for those who want to earn as they spend abroad. With a 0% foreign transaction fee and no annual fee, this is a pretty attractive deal. This card also offers 0.25% cashback on all spending and savings on live events with Barclaycard Entertainment.

However, compared with other credit cards, a 0.25% cashback rate isn’t the best deal and it does not offer a balance transfer option. It also has a 22.9% APR variable.

Applicants must be aged 21 or over, have a personal income of £20,000 or above, and have had a permanent UK address for at least two years. Those looking to get in on this deal must also have at least four years of managing credit, make payments on time and be able to afford repayments.

Lastly, applicants must not have had Individual Voluntary Agreements, CCJs, and must not have declared bankruptcy in the last six years.

Tags: 2021, Credit card, Economy, Personal finances, The Salary Calculator

Interest rates in the UK

by Madaline Dunn

When it comes to borrowing, be it for a mortgage or a loan, an interest rate will be applied to the amount you borrow. The same goes for any savings you accumulate. That said, it can be tricky to get your head around the ins and outs of interest rates.

According to a study conducted by MoneySuperMarket, 70% of those polled didn’t know what the base rate was. That means there are lots of people out there that could do with a helping hand.

At The Salary Calculator, we’ll give you the rundown of interest rates in the UK and make sure you’re updated with the latest. This article will explain:

• What an interest rate is
• What the base rate is 
• What the current interest rates are
• The different types of interest rates
• Whether or not interest rates will rise
• The pros and cons of the current low rates

What is an interest rate?

An interest rate refers to either the percentage an individual is charged for borrowing money or earned through saving. It is typically expressed as a percentage of the amount you borrow or save over a year.

What is the base rate?

The base rate or bank rate is the most important interest rate in the UK and refers to the rate at which banks and lenders are charged for borrowing. Currently, this rate is 0.1% which influences borrowing and saving interest rates.

Current rates

Interest varies from bank to bank, but often it can cost more to borrow less. According to MoneySavingExpert, the best interest rates for loans of between £3,000 – £4,999 range from 7.3% rep APR and 8.4% rep APR.

For larger amounts, for example, between £15,001 – £20,000, the best interest rates range from between 2.8% rep APR and 2.9% rep APR.

When it comes to savings, easy access accounts with best rates range from between 0.4% AER variable and 0.5% AER variable.

The different types of interest rates

There are a few different types of interest rates, these are:

Fixed Rate of Interest – With this interest rate, the amount you are paid, or the amount you owe, is at a set rate that remains unchanged throughout the term of your account. 

Variable Rate of Interest – Also known as a “floating rate,” with this interest rate, the amount of interest you are paid or the amount of interest you owe can change depending on the base rate.

When exploring loans and savings, you will likely run into two other terms, APR and AER. But what exactly do they mean? 

APR – Annual Percentage Rate: This refers to the total cost of borrowing money in a year (loan or credit card). Included within this are interest and standard fees.

AER – Annual Equivalent Rate: This type of interest applies to saving accounts and is the amount you earn in a year.     

Will interest rates rise?

It is difficult to determine for sure whether interest rates will rise. However, considering the current state of the economy, having shrunk by 19.8% in 2020, interest rates are unlikely to rise any time soon.

The pros and cons of the current low rates

When it comes to low interest rates, there are, of course, advantages and disadvantages. These are as follows:

Pros:

• Lower interest rates make it easier for people to borrow money
• When borrowing is made more accessible, this can drive investment
• Low rates can also make housing more affordable by lowering mortgage payments

On the other hand…

Cons:

• Lower interest rates can detrimentally impact savers because they earn less through interest
• As a result, this can reduce the incentive to save
• Low interest can also lead to people taking on more debt than they can afford 

Tags: interest rates, Loans, Mortgages, savings