A recent report by a leading national accounting firm reveals that HMRC is intensifying its focus on cryptoassets. With nearly 5 million people in the UK owning crypto like Bitcoin and Ethereum, this news raises concerns: should you be worried?
Government statistics show a surge in crypto ownership, prompting HMRC to launch a campaign in late 2023 aimed at identifying individuals who have bought and sold these digital assets. This campaign has now progressed into investigations targeting specific taxpayers suspected of owing taxes on crypto transactions from 2022/23 or earlier.
If HMRC opens an investigation, you'll receive a formal letter outlining the legal basis for their inquiry. This notice typically requests detailed records of your cryptocurrency transactions for specific tax years. Tip: Respond promptly if you require more time to gather the requested information; HMRC is usually flexible with reasonable requests.
Owning crypto itself doesn't automatically trigger tax obligations, even if its value increases significantly. HMRC focuses on instances where you've generated income or made gains from selling these assets. Even then, tax liability isn't guaranteed.
If you've bought and sold crypto occasionally, any resulting gains (after factoring in losses) might fall under Capital Gains Tax (CGT). However, if your total gains from all asset sales (including non-crypto) within a tax year remain below the CGT annual exemption (£12,300 for 2022/23), you're exempt from tax and potentially reporting requirements. So, even with an HMRC enquiry, you can relax if you fall within this category. Beware: Frequent crypto trading could trigger income tax liability on your gains (net of losses), exceeding the CGT exemption. Failing to declare these gains could lead to tax penalties.
While you only need to be concerned about exceeding the CGT exemption and engaging with HMRC if you've actively traded and profited from crypto, it's crucial to remember:
Navigating the complexities of crypto taxation can be challenging. Don't hesitate to reach out to our team of experienced professionals for personalized support. We'll help you understand your obligations, minimise tax liabilities, and ensure you're on the right side of HMRC's scrutiny.
Let's Talk Taxes on Cryptoassets:
Contact us today for a complementary consultation and discuss your specific situation. We're here to help you navigate the ever-evolving world of crypto taxation with confidence.
