One of the hottest financial topics at the moment is NFTs - Non Fungible Tokens. Leaving aside questions of the degree to which they could be considered a bubble or environmentally wasteful, we’re starting to get questions about how trade in them might be taxed.
The good news is, there’s not really anything special about them in that regard. If you’re in business making and selling NFTs, then that’s a trade and you’re going to pay tax on the profits. You’ll have identical considerations around structure and tax planning to any other business (one interesting one might be - if your main business is VAT registered, might you want to keep this sideline out of the VAT net by keeping it separate?).
One thing that might be a bit different is that you’re probably much more likely than most businesses to get paid in cryptocurrency. That’s fine - as with any other business, that’s just taxed the same as if you’d been paid in real money. If you get paid one ETH (say) today, that’s about £1,200. That’s your income, whatever you're going to do with the ETH subsequently - you can't defer the tax by keeping the revenue in crypto.
If you convert the ETH into real money at that point, we’re done. If you don’t, and hang on to it, then you need to retain an awareness of the potential Capital Gains Tax consequences of buying and selling crypto. That’s taxed in more or less the same way as buying and selling shares. We wrote more about the traps people might not realise they’re falling into here.
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