With self assessment returns due at the end of the month, HMRC is running a targeted campaign to remind crypto investors of their tax reporting obligations
Any income made over the tax-free threshold needs to be declared and income tax paid. UHY Hacker Young said that HMRC had sent out 8,329 nudge letters to individuals identified as owing tax on cryptoassets, flagging the importance of disclosing gains.
Data from cryptocurrency investors has been collected over the last three years, giving HMRC sufficient data to check individuals’ assets through crypto trading. With an estimated five million crypto investors in the UK, HMRC is also changing reporting from 2025, creating a new crypto section on self assessment tax returns.
Dawn Register, head of tax dispute resolution at BDO said: ‘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.’
HMRC has also released guidance on who is liable to pay tax on cryptoassets, including any crypto received through employment; selling crypto for money; exchanging crypto for alternative tokens; using cryptocurrency to make a purchase; gifting; and using it to donate to a charity.
Capital gains tax is due on the sale of digital assets and income tax on holdings if the individual is deemed as a crypto trader. Miners of cryptocurrency will also be subject to income tax, as well as those gaining interest from staking crypto and trading significant amounts.
Neela Chauhan, partner at UHY Hacker Young said: ‘HMRC is only going to become more determined to intensify its tax crackdown on crypto investors in the next few years. As HMRC gains access to more data, crypto traders will no longer be able to evade the tax authority’s attention.
‘Non-compliance may arise because crypto investors do not know what tax they owe on their digital assets. While HMRC is willing to offer some forbearance in the short term, such as through its voluntary disclosure mechanism, it is unlikely to be so tolerant for long.
‘Investors need to be fully aware of what tax they need to pay, or they will be issued with a heavy penalty on top of the tax they already owe.’
HMRC also launched a voluntary disclosure service last November for cryptocurrency users to declare any tax that is owed.
In addition, the OECD’s Crypto-Asset Reporting Framework comes into effect from 2027. This will require crypto platforms to share information with HMRC on individuals’ crypto transactions.