Why would you need a Bitcoin tax calculator? You will need to pay a tax if you have any cryptocurrency you decide to get rid of (sell, present, donate, etc.). Tax payments are required because capital gains and losses rules apply when you dispose of your cryptocurrency.
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HMRC explains that disposals include:
- selling cryptocurrency for cash
- exchanging cryptocurrency for a different type of cryptocurrency
- using cryptocurrency to pay for goods or services
- giving away cryptocurrency to another person
And calculating those crypto taxes can be tricky as they are calculated based on the capital gains or losses from your digital asset holdings of coins like bitcoin. You are taxed on the value your crypto gains between when you acquire it and when you sell or exchange it.
What does it mean? This means you must keep a complete record of your every transaction to do the correct math.
On the other hand, you can use one of the crypto tax calculators that will do "all the dirty work" for you.
How do you handle your crypto tax?
To accurately calculate your tax liability, you must track your tax lots.
What are those lots? Tax lots entail a cost basis (the amount you originally paid for the crypto), time held, and the price at which you sold the crypto. The cryptocurrency tax calculator handles this automatically, using your investment and trading history.
You’ll need your transaction history to track your tax lots. Additionally, for each sale or exchange, you will need the following information:
- Amount and currency of the coin or token sold
- Fiat value at the time of acquisition
- Date of acquisition
- Fiat value at the time of trade or sale
- Date of sale
It is essential to keep detailed records because trades are challenging to backfill, and any missing cost basis increases your tax liability.
You can backfill missing data from receipts and exchange transaction confirmation emails, but it is much simpler to back up your information from exchanges regularly. Keeping notes on special situations, such as lost coins and ICOs, will help you fill out your tax forms.
How to use a crypto tax calculator?
A crypto tax calculator is a software that, when linked to your crypto exchange account, will aggregate your data and automatically link your cost basis to your sales. They calculate your gains or losses and automatically populate tax reports with your data.
Best crypto tax calculators to use in the UK
TaxScouts is a team of accountants who can help you file your tax form for just £149. This local company knows all the ins and outs of sticking to all the regulations we have in our kingdom.
Their website contains helpful information, including free online calculators for income tax and Capital Gain Tax.
How does it work?
- Register your account
- Answer a questionnaire
- Provide the required documents
- Your self-assessment will be filed for you
It usually takes two days from the point where their accountant has all the necessary documents to file your form.
Remember that if this is your first Self Assessment, you’ll need to register and get your UTR number first. HMRC can take a few weeks to send it by post – so you should register early.
Koinly is a popular platform with a crypto tax calculator, available in over 20 countries, including the UK. It helps you calculate your capital gains using Share Pooling in accordance with HMRC's guidelines.
The platform is also to start using Koinly’s crypto tax calculator. “Start for free. Pay only when you are ready to generate your reports,” its website states. To generate tax reports for filing, Koinly offers four plans costing 0$, $49, $99, and $179.
How to use it?
To use Koinly’s tax calculator, you must import your data from crypto exchanges, wallets, or public addresses. You can then review your transactions and generate your tax reports, which include capital gains, income and gifts, margin trades, options and futures trades, and audit logs. You can export your transactions to tax filing platforms such as Turbotax, Taxact, and Xero.
Recap supports the UK and uses HMRC’s rules relating to cryptocurrency taxation. Launched in 2018, Recap started as a solution for two co-founders who shared crypto tax headaches. Their team is made up of experienced cryptocurrency specialists, all of whom are committed to security and success.
The platform also includes a free plan with unlimited transactions to track your portfolio. However, you will need a paid plan to generate your tax reports.
Tokentax is more than just a calculator. It is the leading crypto tax platform and cryptocurrency tax accounting company. The platform specializes in all kinds of taxes. Even though their primary market is the US, they also support clients from 18 countries, including the UK.
They are one of the first crypto tax software to offer API or spreadsheet/CSV imports. If their system doesn’t already support an import because an exchange is new or obscure, you can still upload the file, and they will handle it manually — no extra work or charges or fiddling with manual templates necessary.
The company also provides several pricing plans with different features to select from.
Here is a step-by-step guide
- Import all your cryptocurrency exchange trade history, as well as any transactions, made off-exchange.
- Verify that all historical data has been imported and that your crypto taxes are calculated properly.
- Decide on an accounting method.
- Export your tax forms.
- Include your crypto taxes on your return!
Bitcoin.tax has launched its full tax preparation service that is available since the 2019 tax year. The good news is that it also supports clients from the UK.
In partnership with tax attorneys, CPAs, and enrolled agents, users of the Bitcoin.tax platform can get tax preparation, advice, and planning with a tax professional to complete and file their tax returns.
What are their services?
- Understand crypto and be able to discuss it with you
- Assist in entering crypto trades into bitcoin.tax
- Assist in tracking and reporting missing or lost records
- Reconcile unmatched transactions
- Provide full-service tax preparation for all tax forms
- Provide tax planning and strategies to identify crypto and non-crypto savings
- Provide advice on wash-sales, airdrops, staking, margin trading, and other complex crypto transactions
How does it work?
Simply import details of any cryptocurrencies you have bought or sold from one of the supported trading exchanges, and add any spending or donations you might have made from your wallet, any mined coins, or income you have received. The rest will be done for you.
You will get:
- A Capital Gains Report detailing every transaction's cost basis, sale proceeds, and gain.
- Income Report with all the calculated mined values.
- Donation Report with cost basis information for gifts and tips.
- Margin Report showing gross profit from margin trading (Kraken only).
- Your Closing Report with your net profit, loss, and cost basis going forward.
BittyTax is a collection of open-source tools for calculating crypto asset taxes in the UK. Its main benefits are retaining user privacy and calculations made for free. The tool consists of three components including an accounting, conversion, and price tool. The tool will run smoothly on any computer with Python 2.7 or 3.x installed.
- Set up the software on your computer.
- Export and record all your transactions in an Excel or CSV file.
- Enter the file into the software and generate your report.
The accuracy of the report depends entirely on the data provided. Each report is split into 4 sections including an Audit and Tax report per year, and 2 appendixes: Price Data and Current Holdings. It has the feature of removing duplicates, supports several output formats, and provides the latest and historic prices of crypto assets and foreign currencies.
Mycryptotax will take care of all dealings with HMRC, relieve you of the hassle, and save you valuable time. The platform helps its clients understand Cryptocurrency tax implications in the United Kingdom and works to take the uncertainty out of compliance and tax reporting to HMRC.
In addition to basic tax reporting, the platform also offers tax filings related to DeFi exchange transactions, mining and staking activities, self-employment, and more. Mycryptotax is regulated by the Chartered Institute of Management Accountants.
How does it work?
- Book a free crypto tax review consultation
- Fill out the form and provide the required documents
- Your tax form will be filed for you.
They also come with 4 different pricing plans to choose from.
Although it can be a headache to track and report crypto taxes, there are numerous crypto tax solutions on the market today to help you fix these issues. This article reviewed some of the most popular options, providing an overview of how they work and the associated pricing.
Under HMRC rules, taxpayers that fail to disclose gains could face a 20% capital gains tax plus any interest and penalties of up to 200% of any taxes due. Those found to have evaded the tax could also face criminal charges and jail terms.
To avoid a situation like this, we recommend using a reliable crypto tax calculator in the UK. Additionally, you should be very careful when filing your self-assessment. If you are not sure about some numbers, it is better and cheaper to hire a professional to help you out rather than end up paying a fine.