REX is proud to announce a partnership with Charlton Baker, Crypto Tax experts from the UK. While this series of 5 articles specifically relates to UK tax law, parallels can be drawn with other jurisdictions. We believe it is important that investors are informed and that we have the tools and alliances to help us navigate complex tax regulations.
Welcome to part 3 of our UK Tax Series.
For easy reference check out the other parts below:
Part 1: Do I need to pay Taxes on my Crypto Profits in the UK?
Part 2: What Crypto Activity do I pay tax on in the UK?
Part 3: Am I taxed when my Rex stake comes to an end?
Parts 4 & 5 coming soon!
Ready. Steady. Stake.
The art of DeFi is becoming big business, with many people choosing to invest their money in crypto protocols that potentially offer wallet-watering returns, like with Rex.
There tonnes of ways in which investors can choose to farm their crypto assets, with Certificate Of Deposit protocols being the latest trend.
You’re part of Rex, so you already know this, but such protocols allow you to buy tokens, stake them, earn rewards during the life of the stake, and have access to your principal tokens and reward tokens when the stake ends.
But what happens to your stake when you get your diamond hands on it?
Well, apart from being a happy moment, it’s also (yes, you’ve guessed it) a taxable moment.
When the stake ends, it’s OK to ignore any growth in value of the principal tokens until such a point in time when they are actually disposed of. Only then, should your principal Rex tokens become chargeable to capital gains tax in the UK.
Here’s the tricky bit.
Your Rex reward tokens, according to current HMRC guidance, should be charged to income tax when the stake ends.
Watch out! You will also be required to pay capital gains tax on your reward tokens when you sell them. Ouch.
As for recordkeeping, as well as keeping up to date with constantly changing guidance, tax rules and rates, a combination of good crypto accounting software and a crypto-savvy advisor like Charlton Baker should be your next steps.
So remember, don’t overlook the fact that staking rewards earned as interest is taxable when your stake ends. Check out our next Rex University session for a bit more detail.
In 2022, HMRC issued new guidance around the taxation of lending and staking in DeFi.
The good news is that this shouldn’t apply to your Rex stakes, but beware, this might apply to other DeFi activity you are involved in. If only the tax rules were as simple and flexible as Rex!
For more information, check out www.charltonbaker.co.uk/news-blog/defi-lending-and-staking.