1. Get clued up
You’re most likely reading this blog because things went wrong last year – now’s the time to work out why and what you can do differently to avoid the same stress again. No more FUD – do your research! Whether that’s educating yourself more on crypto tax, trying out different software or searching out an accountant who’s actually heard of Bitcoin and knows that yes, it is real and taxable.
Shocking hey?! It might be 2020 but there are still plenty of skeptics and cynics out there! Make your own educated opinion rather than relying on some guy from Reddit who doesn’t believe in crypto taxation.
2. Make a plan
Get all the official deadlines in your diary and then give yourself your own cut-offs. Depending on your personality that could be a couple of days, a week or a month before, but having your own targets will help you avoid missing real ones!
Plan out what tasks you’ll need to do, how long you expect them to take and then set reminders to make sure you actually do them. Plan everything – from small things like registering for self assessment to actually sitting down and filling in your return (although if you try some of these ideas, hopefully this shouldn’t take too long)!
3. Stay on top of admin all year round
Cryptocurrency tax is basically one gigantic admin task, so get organised now. Set up a folder and use it to store everything relating to your tax return in. Ideally this should be digital, as loose files are easy to misplace. Throughout the year drop everything into this one place so that when you are ready to file everything is together and you can avoid the last minute scramble round for individual items.
4. Take ownership of your data by getting into a routine
When it comes to keeping records HMRC are very clear that “the onus is on the individual” so get into a routine of downloading your data from exchanges regularly and storing it in your safe place. Get this into your plan, set reminders, pick a date like the first or last day of every month so it becomes a habit.
Useful things to record:
- the type of cryptoasset
- date of the transaction
- if they were bought or sold
- number of units
- value of the transaction in pounds sterling
- cumulative total of the investment units held
- bank statements and wallet addresses
Not only will you feel more prepared for tax purposes but it’s also a useful back up to have should the exchange ever go kaput.
5. Keep track of your crypto and tax all year round with a product like Recap
Recap allows you to connect all of your accounts and upload CSV data to track your whole crypto portfolio, using the information you input to work out your gain/loss and generate a tax report.
Benefits:
- Does the sums on your behalf – accurately, compliantly and quickly – giving you peace of mind that you haven’t made any calculation errors.
- The tax report has been designed to correspond with the fields on the tax return – so you can take figures straight out of your report and fill them in on your self assessment.
- You can keep an eye on your whole crypto portfolio. See how your accounts are doing and monitor your tax position throughout the year – helps you plan your tax and you may even be able to reduce your tax bill.
- In app reminders can help you to manage the tax deadline and file on time.
- Saves time and dramatically reduces your accountancy bill.
- Privacy first – the only crypto tax product built with end-to-end encryption to ensure that only you have visibility of your data.
6. Hang on to all expenses
A classic mistake on all tax returns is forgetting to claim for expenses. Crypto compliance is still in its early stages so although we’re not in a position to advise on what HMRC class as an acceptable expense, it’s worth saving any evidence just in case. Potentially, even your Recap subscription could be claimed back.
7. Register for self assessment early
As a lot of people found out this year, the turnaround time (10 days) can be pretty lengthy so get registered early – just make sure you don’t loose your details in the meantime!
8. Ready to file? Know what you need and get everything to hand first!
If you’ve managed to stay up to date with your crypto accounts throughout the year then filing your report should be a breeze. HMRC explain the whole self assessment process here.
Below is a list of everything you’ll need for your self assessment:
- HMRC login details
- 10-digit Unique Taxpayer Reference (UTR)
- National Insurance number
- Details of your untaxed income from the tax year
- Recap Tax Report
- Records of acceptable expenses
- Contributions to charity or pensions which might be relievable
- P60 or records showing any taxed income received
For crypto tax you’ll need to fill in form SA108 – capital gains and losses. Found it and looking for the word cryptoasset somewhere?… Unfortunately you won’t find it - capital gains tax covers a lot of ground, so filling in a tax return for crypto is not an easy task. We always try to match HMRC wording so when you download your crypto tax report from Recap it should be clear which numbers go where.
You can find out more detail on how to file a UK tax return by clicking here.