Moving to or leaving the UK with crypto: residence, where HMRC says your tokens are, and the five-year rule

Crypto doesn’t have a physical location, so moving countries raises an awkward question: which country gets to tax it? For the UK, HMRC has set out a clear answer, and it follows you. This matters whether you’re moving to the UK with crypto, or leaving and planning to sell.

This guide explains where HMRC says your crypto is, how UK residence works, the treatment of gains after you leave, and the temporary non-residence rule that can bring them back into UK tax. For how UK crypto gains are calculated, see UK crypto tax.

Where your crypto is, according to HMRC

HMRC’s cryptoassets manual says that, although cryptoassets are digital, their location, or “situs”, still has to be decided for tax. Its approach:

• If a token is simply a digital representation of an underlying asset, such as a token representing a gold bar, HMRC looks through it to the underlying asset.
• For exchange tokens with no underlying asset, such as bitcoin, HMRC’s view is that they’re a new type of intangible asset, and the only party to consider is the beneficial owner. So the token is located where its owner is resident.

HMRC says this means a person holding exchange tokens is liable to UK tax if they’re UK resident and carry out a transaction that’s subject to UK tax. If tokens are co-owned, each owner’s share is located where that owner is resident.

For Inheritance Tax, HMRC says the location depends on general legal principles, to the extent double taxation agreements don’t decide it. See crypto inheritance.

Are you UK resident?

Your status depends on the Statutory Residence Test, applied to each tax year from 6 April to 5 April. You’re UK resident only if you meet an automatic UK test or the sufficient ties test, and you don’t meet any automatic overseas test.

GOV.UK has a residence status checker that gives an indication of your status.

Split years

The rules can split a tax year into a UK part and an overseas part. HMRC says Capital Gains Tax would normally apply only to gains arising in the UK part of a split year.

Leaving the UK

HMRC’s helpsheet HS278 says that someone who has left to live abroad and ceased to be UK resident won’t be chargeable on gains made in tax years after they left, unless their non-residence was temporary. Non-residents can still be taxed on gains from:

• assets used in a trade carried on in the UK through a branch or agency;
• disposals of UK land, including residential property.

Crypto held as a personal investment isn’t on that list. And under HMRC’s location rule, once you’re non-resident your exchange tokens are no longer treated as located in the UK.

The five-year rule: temporary non-residence

The catch is for people who don’t stay away long. Generally, the temporary non-residence rules apply if:

• you had sole UK residence for all or part of at least 4 of the 7 tax years before the year you left; and
• you’re away, without sole UK residence, for five years or less before becoming UK resident again.

If you meet those conditions, certain gains and losses that arose while you were abroad are treated as arising in the year you return, and taxed then.

Which gains are caught

The rules mainly catch gains on assets you held before you left. HMRC says gains on assets you acquired after leaving and disposed of during the temporary non-residence aren’t normally caught, with some exceptions, such as assets received under no gain/no loss rules or gains deferred from an asset held before you left.

An example, adapted from HMRC’s. You’ve always lived in the UK. You hold bitcoin bought years ago, move abroad for work, and sell the bitcoin at a £35,000 gain a few months after leaving. Four years later, you return and become UK resident again. Because you were away for less than five years and had sole UK residence before leaving, the £35,000 gain is treated as arising in your year of return. Bitcoin you bought after leaving and sold while abroad would normally be outside the rule.

If the gain was also taxed in the country you moved to, you may be able to claim double taxation relief. HMRC’s helpsheet HS263 explains how.

Arriving in the UK

Once you become UK resident, HMRC’s location rule means your exchange tokens are treated as located in the UK, and taxable disposals, such as selling, swapping or spending crypto, fall within UK tax. Gains are worked out using HMRC’s pooling rules, based on what you paid. See UK crypto tax and reporting crypto on Self Assessment.

Keep records of what you paid for crypto you bring with you, including purchases made before you arrived. HMRC expects you to be able to show your pooled costs.

Leaving and arriving at a glance

Before you move

1. Work out your residence for the year you leave or arrive, using the Statutory Residence Test.
2. List what you hold and when you bought it. Crypto held before leaving is what the five-year rule catches.
3. Check the other country’s rules. Some countries tax crypto when you leave or arrive. See moving to or leaving Canada with crypto.
4. Get advice if large sums are involved. The rules have exceptions, and the dates matter.