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What are the Tax Implications of Being Paid in Crypto?

1 min read

Q: My company is considering paying me in cryptocurrency. What are the tax implications for me?

A: If your employer pays you in cryptocurrency, it’s treated as taxable income by HMRC. This means you’ll owe Income Tax and National Insurance Contributions (NICs) just as you would for regular salary payments.

However, the type of cryptocurrency is important because it can be either classified as a ‘readily convertible asset’ (RCA) or not.

It will be deemed RCA if the crypto can be easily exchanged for cash. In this case, it will be subject to Income Tax and National Insurance Contributions (NICs) via PAYE, just like a regular salary. The value of the cryptocurrency at the time of payment will be calculated in GBP, and tax will be deducted via PAYE.

However, if the cryptocurrency is not considered an RCA, the responsibility to report and pay the appropriate tax to HMRC may fall to you rather than your employer. PAYE deductions might not apply. So, tax is still owed, it’s just a question of how and when it is paid. It’s a question of the method of collection (PAYE vs. self-reporting) that differs.

Later, if you decide to sell or convert the cryptocurrency, you may also be liable for Capital Gains Tax (CGT) if its value has increased. Cryptocurrency’s volatility means it’s important to carefully consider how these tax liabilities may fluctuate before agreeing to be paid this way.

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