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Crypto bookkeeping can be a very complex process. You need to make sure that your business is executing an efficient and effective strategy, but this isn’t always so straightforward.
Business that are involved with crypto activities such as exchanges, funds or businesses that allow transactions with crypto typically have to manage an assortment of different wallets or exchange accounts. Of which these wallets and platforms serve different purposes — a business in the UK that accepts cryptocurrency, for example, may have wallets and accounts with cryptocurrency payment processors as well as accounts on one or more exchanges. Similarly, a blockchain enterprise may have trading accounts on a variety of different exchanges or OTC desks.
These can result in differing transaction histories within different formats as it is spread throughout numerous wallets and platforms. Reporting crypto activity for tax purposes can be increasingly difficult as it may involve collecting data from multiple exchanges and accounting for them in a compliant, holistic manner. This process itself can become a problem for businesses.
Understanding and complying with UK crypto regulations is critical to the success of any UK business that is involved in crypto. Defining exactly how to execute a crypto bookkeeping strategy, however, is complicated. There is no benchmark process for crypto bookkeeping however we have provided the core actions to consider when you are approaching crypto bookkeeping.
Keep track of every crypto related transaction or expense. This will most likely be time consuming on the day to day but can save a significant amount of time and confusion when it comes to reporting. There are several platforms that can be used to help automate or simplify this data collection process such as Xero.
Also consider documenting all crypto related invoices through invoice management tools. UK businesses that transact in cryptocurrency should track both fiat and crypto transactions, then create consolidated reports that cover both. For individuals or businesses that manages multiple wallets and exchange accounts should collect all transaction, base rate, and price data, then consolidate this data by converting values to fiat either manually or with a reporting software.
The cryptocurrency industry is dynamic and ever-changing, so it’s important to stay on top of the latest changes in regulation. The UK’s regulatory landscape can change quickly — if you’ll need to be regularly about any updates in order to remain compliant.
There are many different tools that integrate with cloud-based accounting platforms such as Xero to streamline the crypto bookkeeping process. While it’s possible to manually enter data when reporting crypto transactions, the scale of trade and activities in a business can makes this task highly intensive if not nearly impossible.
Crypto reporting software that integrates with cloud accounting tools can significantly reduce the amount of time it takes to collect, classify, and input data manually, as well as eliminate the potential of user error.
A crypto bookkeeping strategy for any UK business that transacts in cryptocurrency should cover the following tasks:
On top of this there should be a proactive approach to keeping informed of any UK regulatory changes in regards to crypto.
Cryptocurrency bookkeeping can get complicated but following our bookkeeping best practices can help. If your business currently transacts in cryptocurrency and you’re not sure about your tax or reporting obligations, reach out to MJ Kane for a bespoke and comprehensive guidance today. You can find out more about our crypto tax accountants services, or by arranging a consultation with our team on the form below. Alternatively, for urgent queries please call us at: Tel: 028 9335 0290
During your advisory phone call you will be in a position to ask one of our Crypto Tax Specialists any questions you may have regarding tax advice and crypto currency.
You will be provided with bespoke advice unique to your circumstances.
The call will include advice on tax planning and tax saving to ensure that you get the best savings out of your investment.
You will be provided with a report based on the phone call detailing the advice our specialist recommends.
This call will be more than a consultation and will provide you with bespoke, exact tax advice unique to your situation.
You can book a 15-minute conversation with one of our Experts now!
Yes, your cryptocurrency is taxable. HMRC considers cryptocurrency holdings to be a taxable income. The rate your currency income is taxed on will vary depending on the way you receive the income.
Unrealized gains. Gains that are “on paper” only are called “unrealized gains.” For example, if you bought a virtual asset for £10 and it’s now worth £12, you have an unrealized gain of £2. You won’t pay any taxes until you sell the asset or transfer it.
HMRC may investigate your tax affairs if you have invested in cryptoassets, cryptocurrency, and virtual currencies such as Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), Monero (XMR), Zcash (ZEC) and Ripple (XRP).
There are numerous cryptocurrency tax softwares available in the UK and accurately consider UK tax consideration. Koinly Crypto Tax Software is strong consideration for being one of the most user friendly and easy to use crypto reporting tools.
At MJ Kane, we pride ourselves in the years of industrial expertise within the crypto sphere and UK tax. Delivering award winning services to thousands of businesses and individuals across the globe. Learn more about other crypto tax guides and services.