Investing and trading in cryptocurrency has become increasingly popular over the last few years but the tax treatment of any profits made through these activities is not well understood.
Many crypto investors have the mistaken belief that they do not have to pay tax on any profits -this is certainly not the case!
There are potentially huge sums of money involved which has raised the profile of cryptocurrency investment with HMRC.
HMRC are very keen to ensure that all individuals and businesses are paying the correct amount of UK tax on their cryptocurrency and other cryptoassets so if this applies to you or your business, it’s vital that you are aware of your tax obligations.
HMRC will begin issuing ‘nudge’ letters to crypto investors which will warn investors to check that their crypto transactions have been properly reported and that the correct tax is being paid.
The letters will be used to encourage investors to examine whether they have paid the correct sums of capital gains tax (CGT) and income tax on their crypto holdings.
HMRC believe large amounts of CGT and income tax generated from cryptocurrency investments are not being declared for tax purposes.
A spokesperson for HMRC said “We want to help people get their tax affairs right and we regularly undertake activity to educate customers who might need help. Our letter asks cryptoasset holders to review their transactions to ensure that they are declared correctly.”
There is probably an increasing amount of hidden wealth thanks to the rise of cryptocurrencies with many investors holding the mistaken belief that HMRC is unable to find out about their crypto investments and any gains they have made.
Actually, HMRC has the ability to gain a full list of cryptocurrency holders by sending data requests to UK-based cryptocurrency exchanges and other financial institutions.
Investors should come forward now to declare their cryptocurrency income as those who are later found to have misreported their crypto holdings could be at risk of prosecution.
If you are involved in crypto investing and you need help to get your tax right, or if you are unsure how to respond to a ‘nudge’ letter from HMRC get in touch at email@example.com
8 March 2022
On 8 July 2020, as an urgent response to the pandemic, the government announced a number of VAT measures including a temporary reduction of the VAT…
1 March 2022
From 1 April 2022, the government is increasing but the National Minimum and National Living Wage rates. The National Minimum Wage is the minimum amount an…
10 January 2022
HMRC has given self-assessment taxpayers more time to ease COVID-19 pressures. With the self-assessment deadline less than three weeks away, many individuals and agents will be…