HMRC issues new warning to crypto users over tax obligations

January 9, 2024

HMRC has today issued a new warning to crypto users that they may have to file a Self Assessment tax return before the 31 January deadline and pay any tax due on gains.

The warning comes amid concerns that many crypto owners may be unaware of the tax treatment of crypto gains and their obligations to declare and pay tax on them.

HMRC’s own research published in July 2022 found that one in 10 of the adult population in the UK population held crypto assets.

The tax treatment of crypto assets can be complex. However, in simple terms HMRC sees the profit or loss made on buying and selling of exchange tokens as within the charge to Capital Gains Tax (CGT). Its guidance says that only in exceptional circumstances will HMRC accept that buying and selling of crypto amounts to a trade for tax purposes.

For individuals, this means that if you have sold crypto for a profit during the 22-23 tax year, you may have reporting and tax obligations, and need to consider whether you need to file a tax return before 31 January 2024. It is also necessary to declare crypto losses if individuals want to offset those losses in future tax years.

Last November, HMRC opened its first dedicated disclosure facility for people needing to declare previously undeclared crypto gains.

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 own research has found that crypto ownership is more concentrated among younger age groups with many people being unaware of the tax treatment. However, 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% of the tax – or more if the holding was based offshore.”