Currently, stablecoins are taxed in the same manner as other cryptoassets. However, this is anticipated to change in April 2027, when eligible stablecoins will likely be classified similarly to money for tax purposes.
Why choose stablecoins?
Stablecoins are predominantly US dollar-based, with over $300 billion in circulation. They offer significant convenience for investors looking to hold their funds while trading more volatile cryptoassets.
Stablecoins provide an efficient means of payment for goods and services, minimizing the costs typically associated with traditional payment methods like credit cards, particularly in cross-border transactions. Approximately 1.2 million individuals participate in stablecoin transactions, and the upcoming changes will simplify the tax framework.
Defining eligible stablecoins
An eligible stablecoin will be generally defined as a cryptoasset that maintains a stable value relative to a fiat currency. To support this stable value, fiat currency or other assets must be held.
Disposal of cryptoassets
Most disposals of cryptoassets incur capital gains tax (CGT). A disposal occurs when an individual:
– Sells a cryptoasset;
– Exchanges one type of cryptoasset for another;
– Uses cryptoassets to purchase goods or services; or
– Gifts cryptoassets to another person (except to a spouse or registered civil partner).
However, no disposal occurs if an individual merely transfers cryptoassets between different wallets.
Changes in tax status
Starting from 6 April 2027, the disposal of eligible stablecoins by individuals will be exempt from CGT. While most stablecoins do not accrue interest, any interest-like returns from holding eligible stablecoins will be classified as savings income and subject to income tax. The personal savings allowance of £1,000 or £500 may be applicable. The government’s policy paper on the taxation of stablecoins can be found here.