So I’m thinking that I earn a little bit of hive here and there, who cares?
Apparently the tax man…
Obviously I know this, the only things certain in life are death and taxes. But what really is the situation for me? I’m not making millions, in fact, im not making thousands but perhaps i should check in case i hit upon the next memecoin and make it big.
His Majesty's Revenue and Customs (HMRC) have some nice guidelines that we should all adhere to, a real interesting read. HMRC classifies cryptocurrencies and NFT assets as property, not currency, for tax purposes. This distinction influences how gains, income, and transactions involving crypto are taxed.
Taxation for individuals
Maybe surprisingly everything I receive on Hive is taxable and subject to Income Tax:
- Payment for goods or services.
- Mining rewards.
- Staking rewards.
- Airdrops (provided they are received as part of an activity, such as a promotion).
This is taxed on the value at the time of receipt.
Then I get to pay tax on the asset if I manage to make a profit, ok we get an annual allowance so we can take a little profit every tax year, in the form of Capital Gains Tax. Transactions that attract CGT are
- Sale crypto assets for fiat currency.
- Exchange of one cryptocurrency for another.
- Use of crypto assets to pay for goods or services.
- Gift of crypto assets to someone (excluding a spouse or civil partner).
Record Keeping
This is where it starts to get difficult for me, and probably many when it comes to hive, record keeping. HMRC requires individuals to maintain detailed records of all crypto transactions. This includes dates, amounts, the value in pounds sterling at the time of the transaction, and associated costs.
So firstly I need to have logged all my transactions, then I have to have converted this transaction to sterling, then I need to work out if its income.
Looks like I need to do a bit more research…
Luckily @steevc pointed me in the direction of a script from @pharesim that gets a csv of Hive transactions so I have a start, now just to convert them all into sterling and check what costs I should be using to calculate any gains, any body have any ideas?
Please note - I am not a financial or tax advisor, non of this post is advice or should be taken as such. Tax laws are different in different countries. Please do your own research
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Might be a good idea to mention that your post is not advice, and that the rules differ depending on who wants taxes from you. Also if it could be considered a business activity, which makes it a lot more complicated.
Regarding your question, there are several apis for historical price data. I think last time I needed to do that myself I used yahoo. There are paid services for crypto tax summaries by now which hopefully can work with the csv my script provides, I would love feedback on that if anyone wants to try out one of them),
If your transaction count isn't too high or not spread over too many chains and you prefer to do it yourself, the price apis usually provide daily steps and you choose if you use the start or end of the day, or the weighted average that site provides consistently throughout the year.
You then keep track of any price change between receiving and trading an asset, which can either be done by keeping track of which you bought when and apply fifo or lifo or the average price consistently again. There might be local rules that require you to use a certain method.
Thanks for replying, I have updated the post as you suggested and will remember that for the future!
The UK uses a pooled cost for its calculation of taxable profits from what I understand and I'll be looking at some of the different services available and let you know how your csv out put works with them 👍
Thanks again for writing the script !BBH
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That's quite insane - basically any Hive income is just a microtransaction. Even the best paid posts generate just like $50 for the author. Filling tax refund with like a 50 curation and 10 author rewards per day, often of like $0.1, is sheer madness to me.
It is indeed, impossible to track all these microrewards. I would never ever disclose crypto earnings voluntarily.
Yes, insane, that about sums it up.
It will be tricky to calculate what you actually made with the price fluctuations. We can earn up to £3000 before paying CGT, but that could be one big transaction for some people. I expect they will not notice until you convert to or from fiat, but it's probably best to get advice if you are concerned.
I’m not really concerned as I don’t think my transactions will amount to much regards CGT as I’m not planning on selling/trading much. The problem really is that effectively every transaction is taxable as income.