Stablecoins and Capital Gains Tax – changes expected from April 2027
The tax treatment of some stablecoins is expected to change significantly from 6 April 2027.
At present, stablecoins are generally taxed in the same way as other cryptoassets. Under the proposed changes, eligible stablecoins would instead be treated more like money for tax purposes.
What are stablecoins?
Stablecoins are a type of cryptoasset designed to maintain a relatively stable value, normally by reference to a conventional currency such as the US dollar.
They can be useful to crypto investors who want to move out of more volatile cryptoassets temporarily without necessarily withdrawing funds into conventional currency.
They can also be used to make payments, including cross-border transactions.
How are cryptoassets currently taxed?
For individuals, disposing of a cryptoasset can give rise to Capital Gains Tax.
A disposal can occur when you:
sell a cryptoasset;
exchange one type of cryptoasset for another;
use cryptoassets to pay for goods or services; or
give cryptoassets to someone other than your spouse or civil partner.
Simply moving the same cryptoasset between wallets you own would not normally amount to a disposal.
What will change for stablecoins?
From 6 April 2027, disposals of qualifying eligible stablecoins by individuals are expected to be exempt from Capital Gains Tax.
This could considerably simplify the tax position for people who regularly move between eligible stablecoins and other cryptoassets.
An eligible stablecoin will broadly need to maintain a stable value by reference to a fiat currency, supported by appropriate currency or other assets.
What about interest earned on stablecoins?
The proposed Capital Gains Tax exemption will not necessarily mean that all returns from stablecoins are tax-free.
Where a holder receives an interest-like return from an eligible stablecoin, this is expected to be treated as savings income and potentially subject to Income Tax.
Depending on the individual's circumstances, the Personal Savings Allowance may be available against that income.
What should crypto investors do?
The changes are not expected to take effect until April 2027, so the existing Capital Gains Tax rules continue to apply in the meantime.
Anyone carrying out a significant number of cryptoasset transactions should keep comprehensive records of acquisitions, disposals, exchanges and associated costs.
The distinction between an eligible stablecoin and other cryptoassets will also become particularly important once the new rules take effect.
Contact us
Please contact us to find out how the above applies in your circumstances and how we can help you.
Please note that the above is for general information only and does not constitute financial or tax advice. You should not rely on this information to make or refrain from making any decisions. You should always obtain independent professional advice in respect of your own situation.