UK is Enforcing Exemption of Tax on Foreign Crypto Purchases

The UK is to become crypto hub: Government is enforcing an exemption Tax on foreign Crypto purchases

Tax on Foreign Crypto Purchases: Foreign Investors purchasing cryptocurrencies in the UK must be happy as the government is enforcing a tax exemption for foreign investors buying crypto through local investment managers or brokers starting January 1st.

The tax break, announced in December, is a part of Prime Minister Rishi Sunak's plans to turn the U.K. into a crypto hub.

The UK and Cryptocurrencies

"This exemption is an important factor in attracting global investors, meaning foreign investors won't be brought into U.K. tax simply by appointing U.K.-based investment managers," the government's tax arm, the HM Revenue and Customs, said in an email to CoinDesk. "To build upon the U.K.'s position as an investment management hub, this exemption has been extended to include crypto assets, so that funds which include them aren't put off from appointing U.K. managers."

The country already has a tax guide for resident crypto traders. In July, the HM Revenue and Customs published a consultation to gather views from investors and professionals on how it should tax Decentralized Finance (DeFi). HMRC are clear that crypto may be subject to both Capital Gains Tax and Income Tax depending on the specific transaction. For capital gains from crypto over the £12,300 tax free allowance, you'll pay 10% or 20% tax. For additional income from crypto over the personal allowance, you'll pay between 20% to 45% in tax.

The exact amount you'll pay will depend on the transaction you've made, the tax that applies and the Income Tax band you fall into. The crypto tax you'll pay depends on the specific transactions you're making with your crypto. If you're seen to be making an income, you'll pay Income Tax. If you're seen to be making a capital gain, you'll pay Capital Gains Tax.

Parliament is debating the wide ranging Financial Services and Markets Bill that would give local financial regulators more powers over crypto if passed into law. The U.K. Treasury also plans to kick-start a consultation in the coming weeks on how the crypto sector can be regulated.