NEWS & VIEWS
Nudge letters
HMRC sent a number of ‘nudge letters’ to those it suspects are failing to pay the correct tax on their crypto gains across August and September.
The letter warned recipients that if an assessment concludes that there is additional capital gains or income tax to pay on previously undisclosed crypto gains, there may also be interest due on any late payments, as well as penalties.
It is not the first time HMRC has sent nudge letters relating to cryptoassets in recent years. The tax authority has increased its focus on cryptocurrency holders in recent years, having previously suggested that tax non-compliance among crypto investors could range from “as high as 55% to 95%.”
Tax liabilities
Capital gains tax (CGT) is the principal tax likely to apply to investments in cryptoassets. HMRC issued guidance back in 2018 explaining that an investors might need to pay CGT when they sell tokens, exchange tokens for a different type of cryptoasset, use tokens to pay for good or services, or give away tokens to a another person.
However, research by HMRC and Kantar UK has shown that many owners of cryptoassets are not fully aware of their tax obligations. And some may not have filed out a tax return before, especially given crypto is popular with younger investors.
The recent drop in the annual exemption allowance to £3,000 has also brought more investors into the scope of CGT.
Chris Etherington, partner at accountancy firm RSM UK, told the Financial Times: “When the allowance was £12,300 a lot of people could be in this space and not have to worry about complexity. Now what we have is £3,000 and that doesn’t take that much [to trigger].”
Self Assessment
In August, HMRC released the draft 2024-25 Self Assessment return pages for individuals and trusts. The draft return includes a new section for cryptoassets in the CGT pages. Previously, cryptoassets had always been reportable in the ‘other property, assets and gains’ section of the Self Assessment. This new section means that tax reporting systems will now need to be able to distinguish between gains and losses on cryptoassets, as well as other investment assets.
CGiX already has a separate classification for cryptocurrency. This means that customers who trade cryptocurrency will be able to use CGiX to see the capital gains and losses calculated on those assets.
If you have any questions, get in touch with our team.