NFT’s (Non-Fungible Tokens) have been making waves in the news recently. In 2021 “EVERYDAYS: THE FIRST 5000 DAYS” was sold for 69.3 million USD, but what exactly are they and how are you taxed on NFT’s?
Non-Fungible Tokens are essentially unique parts of the blockchain, these could almost anything digital eg. pictures, drawings, music etc. Most NFT’s that you’ll have heard about recently will be digital artwork.
So how are you taxed on NFT’s? Well, that depends whether you’re an artist creating and selling NFT’s or if you’re a collector buying and selling NFT’s
If you’re buying NFT’s to hold and potentially later sell, your gains would fall under the capital gains tax regime, therefore based on current tax rates you’d be paying 10% or 20% depending on your other income and the amount of the gain.
If you’re an artist, the NFT’s you sell would likely be considered trading income by HMRC. You would therefore pay tax at 20% and/or 40% on your profits and 9% or 2% national insurance; depending on your income in the year.
Trading of cryptocurrency is not taxed in the same way, contact us here to find out more.