Earlier this year, the United Kingdom officially began enforcing a tax exemption for foreign investors buying crypto. Specifically, this exemption applies to foreign investors who buy their cryptocurrency using a local investment manager or broker.
The tax break was originally announced in December 2022 and went into effect on January 1, 2023.
This tax exemption is just one step toward the goal of turning the U.K. into a cryptocurrency hub. This is one of many goals of Rishi Sunak, the country’s Prime Minister.
According to HM Revenue and Customers, the U.K. tax arm, this exemption should help attract global investors. It will do so by not bringing foreign investors into the U.K. tax system just because they use an investment manager based in the U.K.. The exemption already applied to other types of investments, but it now also includes cryptocurrency.
Of course, if the U.K. becomes a crypto hub, this will also drive people to hire local investment managers.
More on the U.K. as a Crypto Hub
As mentioned, this is just one aspect of the U.K.’s goal of becoming a crypto hub. The country also created a tax guide for crypto traders who are residents. Additionally, HM Revenue and Customers published its consultation about taxing decentralized finance. This consultation included views from crypto professionals and investors.
There is also a bill in Parliament that could give regulators more power concerning cryptocurrency. The Financial Services and Markets Bill covers a wide range of financial investments, with cryptocurrency being just one of them.
What About U.K. Residents?
This exemption specifically applies to foreign investors. U.K. residents are not exempt from paying taxes on their cryptocurrency investments. They must still pay a capital gains tax that matches their tax bracket. There is currently a 12,300-Pound tax-free allowance on capital gains from cryptocurrency in the U.K. but be sure to consult your tax accountant.
Continuing the Edinburgh Reforms
This latest tax break is a continuation of the financial changes originally announced in the Edinburgh Reforms. As a refresher, the U.K. Treasury unveiled these financial service reforms in December 2022. Those reforms were largely introduced to replace the laws of the EU following Brexit.
Foreign investors who buy cryptocurrency via U.K. brokers or investment managers do not have to pay U.K. taxes. A similar rule was already in place for many other types of investments. This is just part of the U.K.’s efforts to become a cryptocurrency hub.
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