Between a node that makes your own transactions traceable and a mining rig in the cellar lie worlds, for tax purposes. The first task is therefore to classify the facts correctly — the arithmetic comes afterwards.
A worry we meet regularly — and one that can be resolved in a few sentences.
Under section 15(2) of the Income Tax Act, a trade requires an independent, sustained activity carried on with the intention of making a profit and amounting to participation in general commerce. Someone running a node purely for themselves meets none of this.
No income is generated, no service is offered on the market, and there is no participation in commerce. The node is a technical aid to managing your own assets — no different from a spreadsheet or accounting software.
Wanting to run your own wallet without a third-party provider, to follow your transactions independently, or to obtain data for your own tax return are all objective reasons. The last of these comes up often: a node supplies the history that a closed exchange no longer provides.
The line shifts as soon as the node produces income — as a validator sharing in rewards, for instance — or is run for others. The same criteria as for mining then apply, and the assessment starts again.
Our advice: record the purpose. A short note of when and why the node was set up costs five minutes and ends the discussion in a later audit.
Unlike pure trading in crypto assets, mining often does amount to a trade — because something is genuinely produced and exploited.
Purpose-bought hardware, an operation set up to last, a separate electricity contract or site, planned reinvestment in further capacity, participation in a mining pool aimed at regular income, and the scale of the resources deployed.
Use of hardware you already own, occasional activity not set up to last, no economic plan, no reinvestment, and income on a scale that does not cover the outlay.
If mining is classified as a trade, the mined coins belong to the business assets. There is no holding period there: the later sale is fully taxable, however long the coins were held. That is regularly the larger effect, greater than trade tax itself, which for individuals is largely credited.
Conversely, within a business, hardware, electricity and premises are deductible — with a rig of any real electricity consumption, that can be substantial. The classification is therefore not merely an irritation but a calculation with two sides. The full analysis
The most laborious part of the work — and the part where standard software fails most often.
Mined coins are recognised at their market value when they accrue. With a pool distributing daily or hourly, a year quickly produces several thousand individual valuations, each needing a time of accrual and a price.
If the price falls between accrual and sale, a loss arises against the value recognised; if it rises, an additional gain. Collapsing the two produces a result that is wrong both as to timing and as to amount.
We cross-check every position by machine as well: times of accrual, prices applied, totals per pool and the consistency of holdings. Every deviation is flagged and resolved by hand before any figure enters the return.
The business expenses follow the familiar rules — but the evidence decides.
Computers, graphics cards, ASICs and accessories are depreciable fixed assets written off over their useful life. Low-value assets may be deducted immediately. Where technical obsolescence shortens that life, the shorter period must be reasoned.
Where the rig runs in a private household, the business share must be established. A sub-meter is the best evidence; failing that, a traceable calculation from power draw and running time. Without an apportionment the figure will be estimated — not in your favour.
A room used specifically for the activity may be deductible; the conditions differ according to whether it is a home office within the meaning of the rules or a room used for business purposes. With a rig needing significant space and cooling, this warrants separate examination.
If mining stops, the remaining assets must be withdrawn or sold and the gain on cessation computed. Coins still held are regularly overlooked here, although they can be the largest item.
As long as there is no obligation to keep full books, the cash-basis computation suffices. Cash-basis accounting with crypto
Running times, hash rate, pool statements, electricity bills and purchase invoices belong in an ordered file. In an audit those documents are worth more than any explanation given afterwards.
A case we are preparing — and one that would matter considerably for miners.
The tax authorities value mined coins at the market price when they accrue. Two objections seem to us to need clarification.
The economic one: if the price then falls, tax is payable on a value never realised. With an asset class of this volatility that is not a marginal case but the normal case in a downturn.
The systematic one: with self-mined coins the asset comes into existence only through your own activity. Whether that already constitutes a realised increase at the moment of creation, or whether taxation ought to attach to the disposal, is a question of the realisation principle — and therefore of ability to pay.
Anyone mining and holding the rewards should not let the assessment become final. An appeal costs no fees and keeps the question open. The appeal procedure
Whether mining income is within the scope of VAT has not been conclusively resolved. The main argument against it is the absence of an identifiable recipient: the block reward is not paid by a particular principal but arises under the protocol. Without an exchange of supply and consideration in the VAT sense, there is nothing to attach to.
The position can be different for transaction fees attributable to a specific principal. It also changes where rigs are run for others or computing power is sold.
Input tax matters here too, and practically so: anyone taking the view that there are no taxable supplies cannot recover input tax on the hardware either. With a rig costing six figures that is a question to settle before the purchase, not after it.