fbpx

HMRC warns millions of crypto users to file tax returns

Crypto tax Image credit: Rabanser / Shutterstock

The UK tax authority has issued warnings to millions of people holding cryptocurrencies that self-assessment tax returns must be submitted for crypto gains.

HM Revenue and Customs warned that income from cryptocurrencies above the tax-free allowance must be declared to avoid paying late filing penalties and interest charged on the amount owed.

Research from the Financial Conduct Authority (FCA) from 2021 found that just under five million people in the UK held cryptoassets, a number that has likely risen.

“The crypto boom means that it’s become a big tax opportunity for the Treasury, almost overnight,” commented Seb Maley, CEO of self-employment advice group Qdos.

“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.”

HMRC said that tax on cryptocurrencies may be due when someone sells or exchanges cryptoassets – for other forms of crypto as well as fiat currency – or if someone receives cryptoassets from employment.

Self-employed workers and others generating income outside of employment submitting self-assessed tax returns is nothing new. However, HMRC issued the warning as crypto users may be unaware that gains from the alternative currency are taxable.

The UK this month introduced a new tax policy requiring those making more than £1,000 a year from side hustles such as second-hand ecommerce and Airbnb rentals to file tax returns on that income.

“It’s crucial that those making money in new ways – whether through crypto or side hustles – get on top of their tax affairs too,” added Maley.

“One thing’s for sure, HMRC is ramping up its compliance activity and will launch tax investigations if it suspects foul play.”

It comes after the UK introduced stricter rules for crypto promotion. Binance, the world’s largest cryptocurrency exchange, said it would no longer take on new UK customers due to the crackdown.

Read more: Industry predictions for crypto in 2024