Koda Cryptocurrency – Should I Pay Income Tax And NIC If I’m Paid In Cryptocurrency?
As the popularity in cryptocurrency grows, more and more people are getting paid in cryptocurrencies. However, this has led to questions around Income Tax and National Insurance Contributions for those that are being paid in crypto coins.
In this blog post we help you understand if and how you need to pay Income Taxes and NIC on payment via cryptocurrencies.
Starting at the beginning, if you receive crypto assets as a payment for services in the UK from your employer, then this will count as earnings. This means that income tax and NIC will be applied based on the value of the cryptocurrency payment you receive.
Crypto assets are considered as a ‘readily convertible asset’. This is because they are part of a tradeable market. In turn, this means that the primary taxing obligation lies with the employer. This is done in a similar way to employers withholding taxes on a cash salary for example.
Due to the fact that the value of crypto coins can fluctuate, and some crypto coins will need to be sold to pay a cash equivalent to HMRC, some administrative difficulties can arise. There are times that technology companies will pay their employees in this way. However, currently, this is rarely any more efficient to do so than paying cash.
If you are working as a self-employed consultant and not the employee of a company, but you receive crypto coins for the consultancy work, you are responsible for taxes. It is your responsibility to report and pay income tax and NIC in your annual self-assessment tax return. You are breaking the law if you do not report and pay any taxes or NIC due.
As the popularity of cryptocurrencies grows, more and more people will start to become paid through crypto coins.
If this is something you are considering for your business, speak to our team at [email protected] As an investor in cryptocurrency, it’s a great way of growing the market for everyone.