HMRC has issued a new warning to cryptocurrency investors that they may have to file a Self Assessment tax return and pay tax due on gains. The warning comes amid concerns that many crypto owners may not be fully aware of the tax implications related to crypto gains and their obligations to declare and pay tax on them.
Myrtle Lloyd, HMRC’s director general for customer services, said: “People sometimes forget that information about crypto-related income and gains need to be included in their tax return.
“Some people affected may not have had to do a tax return before, so it is important people check. With the Self Assessment deadline just a matter of weeks away, I am urging people not to put off completing it.
“Help is at hand – you can access a wide range of resources and support online, just search ‘help with Self Assessment’ on GOV.UK.”
The deadline to complete a tax return and pay any tax owed is January 31, 2024.
Anyone with cryptoassets should declare any income or gains above the Capital Gains Tax-free allowance on a tax return.
As this return is for the 2022/23 tax year, the Capital Gains Tax-free allowance is £12,300. The allowance will reduce to £6,000 in the next tax year to be reported (2023/24), after which it will halve again to £3,000.
According to HMRC, tax may be due when a person:
- Receives cryptoassets from employment, if they’re held as part of a trade, or are involved in crypto-related activities that generate an income.
- Sells or exchanges cryptoassets, including:
- selling cryptoassets for money
- exchanging one type of cryptoasset for another
- using cryptoassets to make purchases
- gifting cryptoassets to another person
- donating cryptoassets to charity.
If customers are unsure whether they need to complete a tax return, they can check by using the free online tool on http://GOV.UK .
Failure to submit a tax return by the deadline could result in a fine. HMRC said it will consider a customer’s reasons for not being able to meet the deadline and those who provide a reasonable excuse may avoid a penalty.
The penalties for late tax returns are:
- An initial £100 fixed penalty, which applies even if there is no tax to pay, or if the tax due is paid on time
- After three months, additional daily penalties of £10 per day, up to a maximum of £900
- After six months, a further penalty of five percent of the tax due or £300, whichever is greater
- After 12 months, another five percent or £300 charge, whichever is greater.
There are also additional penalties for paying late of five percent of the tax unpaid at 30 days, six months and 12 months. Interest will also be charged on any tax paid late.
Dawn Register, head of tax dispute resolution at BDO said: “This warning from HMRC highlights the tax authority’s growing interest in those people who have made gains from crypto assets but have failed to declare them.
“Part of this may be down to lack of knowledge. Indeed, HMRC’s research has found that crypto ownership is more concentrated among younger age groups with many people being unaware of the tax treatment.”
However, Ms Register noted: “Ignorance of the rules won’t give you a free pass.
“If people don’t declare what they are required to and HMRC discovers that additional tax is due, it can charge late payment interest in addition to tax-geared penalties of up to 100 percent of the tax – or more if the holding was based offshore.”
For guidance on how to complete a tax return, HMRC has a wide range of resources online, including a series of video tutorials on YouTube, help and support on GOV.UK.
Self Assessment customers can submit their tax returns and pay any tax owed online, however, HMRC noted that the “quickest and easiest” way to pay the bill is through the tax body’s secure app.
There is also support available for customers who are unable to pay their bills in full. HMRC may be able to help by arranging an affordable payment plan, known as Time to Pay for customers who owe less than £30,000.
Customers can arrange this themselves online by visiting GOV.UK and searching “HMRC payment plan” for more information.
