Crypto gains

Crypto currency has always been a bit of a grey area when it comes to tax. Back in April 2021 we wrote a blog about how crypto gains are taxed. However, not everyone was aware of the tax implications of crypto gains.

Last week HMRC announced an opportunity for people to declare unpaid tax on gains made over the past four years from Crypto currency, NFTs, and Utility Tokens. This is an opportunity for crypto investors to voluntarily disclose unpaid tax – and to calculate the amount of interest and penalties due.

There’s an online calculator and a step-by-step guide on what you’ll need to have in the way of information to submit your declaration. 

You’ll need to decide – and offer evidence – about whether you simply hadn’t realised that you should have paid tax, whether you hadn’t got your tax affairs in order or whether you’ve been avoiding paying tax on your crypto gains. The HMRC options for not having paid the correct taxes are:

  • Despite taking reasonable care
  • Because you did not take care
  • Because it was something you did deliberately

The amount you pay in penalties will be based on this decision. If you choose the first option, the amount due will be based on the past four years. However, if care was not taken, the six years tax due will need to be paid. If you’ve deliberately avoided paying tax on your crypto gains you’ll be looking at up to 20 years back payments.

On the form there’s a space to provide your explanation and HMRC will base their final decision about what you owe on what you tell them here.

Clearly, if they suspect you’re trying to avoid paying the full amount you owe, they’ll be investigating, so it’s best to be completely transparent. As a partner in London accountancy firm, Mercer & Hole observed “Irrespective of how your crypto has performed, it is crucial to make sure you are reporting your crypto correctly, to get your tax right or to take advantage of valuable tax relief on any losses.”

Once you’ve made your declaration, HMRC will contact you within 15 days, providing a payment reference number and payment will be expected promptly. You can be sure they’ll be checking up on payments and, if you are unable to pay the amount due, you’ll need to undergo examination of all your income, monthly outgoings and assets to assess your ability to repay the amount due over an agreed period of time.

As HMRC announced in the 2023 Budget that there would be a much tighter scrutiny of all crypto transactions, it’s wise to ensure you’re up-to-date with any tax due. Crypto transactions can be complex and if you own crypto currency, NFTs or Utility Tokens, you would be well-advised to consult an accountant.


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