Our last blog answered some big questions: What is Cryptocurrency? And how might crypto tax and crypto assets impact my finances?
But there’s a lot more to understand about cryptocurrencies. Our experts have increasingly been asked to explain Bitcoin mining, or crypto mining, and how to declare mined assets to HMRC.
How does cryptocurrency mining work?
If you have a finger on the pulse of cryptocurrency, you’re likely to have heard the phrase ‘Bitcoin mining’, or ‘crypto mining’. It refers to the process of earning cryptocurrency, helping to regulate the cryptocurrency market.
Since cryptocurrencies aren’t centralised, they aren’t monitored by a single bank or Government. In fact, those invested in the currency monitor transactions, and are rewarded with crypto tokens in payment.
So, by ‘mining’ you can get hold of cryptocurrency. There’s a big appeal here for a lot of people, who see it as making money from nothing.
Of course, it’s much more complex than that. It’s performed by high powered computers solving complex mathematical problems – far beyond the capabilities of humans. When one of these problems is solved, two things happen. Firstly, new Bitcoin is issued. Secondly, the Bitcoin payment network is legitimised thanks to the miner’s efforts in verifying transaction information.
How do I declare income from crypto mining to HMRC?
If you receive tokens from mining and are not trading, the tokens will be treated as other taxable income. You will therefore need to complete a Self-Assessment Tax Return.
You may be able to avoid filing a Tax Return however, if you’ve received:
- Crypto assets worth less than £1,000
- Less than £2,500 from other untaxed income
To discuss the nuances of cryptocurrency investing in more detail, contact Martin Frain at email@example.com or call 0161 703 2500.