4.97m individuals holding cryptocurrencies in the UK have been urged by HMRC (on 9 January) to check if they need to submit a self-assessment tax return on 31 January – or risk late filing penalties and interest charged on the amount owed to the tax office.
Those with self-employed income or gains from cryptocurrency above the tax-free allowance are required to complete a self-assessment tax return and pay their tax liabilities annually.
Anything submitted past midnight on 31 January is considered late and can incur a £100 fixed penalty, which applies even if there is no tax to pay or if the tax is paid on time.
After 3 months, these penalties can rise to £900, with HMRC applying a further 5% penalty (or £300, whichever is greater) after 6 months, before another 5% (or £300, whichever is greater) after 12 months.
This is in addition to interest charged on any tax paid late.
With approximately 5m people holding cryptocurrencies in the UK, a tax insurance provider for self-employed workers has highlighted the importance of those holding cryptoassets and making money via side hustles to prioritise their compliance.
HMRC details that tax on cryptocurrencies may be due when someone:
- 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
Seb Maley, CEO of Qdos, said, “With the self-assessment deadline looming, HMRC has issued a warning to the 5m people with cryptocurrency in the UK. It’s an important reminder that if you file your tax return late or miss the payment deadline, HMRC will have no hesitation in issuing penalties and interest, which can mount up very quickly.
“The crypto boom means that it’s become a big tax opportunity for the Treasury, almost overnight. In our experience, this has resulted in a lot of confusion among people holding cryptoassets, who aren’t always sure if they need to file a tax return.
“While seasoned self-employed workers are well aware of the importance of filing their self-assessment, it’s crucial that those making money in new ways – whether through crypto or side hustles – get on top of their tax affairs too.
“One thing’s for sure, HMRC is ramping up its compliance activity and will launch tax investigations if it suspects foul play.”
