Correct! Tax can arise when rewards are credited
Automatically reinvesting a staking reward doesn’t necessarily postpone the tax point.
When reward tokens are credited to you and you can control them, their pound sterling value will generally be treated as taxable income, even if the platform immediately stakes them again and you don’t withdraw any cash.
Credited doesn’t always mean displayed
A reward that is still accruing or remains unavailable to you may require a different assessment. The precise tax point depends on the staking arrangement and when you can control the tokens.
How it works
Imagine that your staking platform credits you with rewards worth £200.
Instead of transferring the tokens to your wallet, the platform automatically adds them to your staked balance.
You may still need to record:
£200 that may need to be recorded as income on the date the rewards were received;
the token quantity and GBP market value at that time;
any fees connected with the reward;
what later happens to those tokens.
Automatic reinvestment changes how the reward is used. It doesn’t necessarily change the fact that the reward has already been received.
And there may be another tax calculation later
The GBP value recorded when the reward was received generally becomes part of its acquisition cost for Capital Gains Tax purposes.
If the reward tokens are later sold, swapped or spent, you may also need to calculate a capital gain or loss.
One reward can therefore create an income record first and a separate capital calculation later.
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For each staking reward, try to retain:
- 1
the date and time it was credited;
- 2
the number and type of tokens received;
- 3
its GBP value at that time;
- 4
the platform or wallet involved;
- 5
any automatic reinvestment transaction;
- 6
the eventual sale, swap or other disposal.
