HMRC Crackdown on Cryptocurrency traders
HMRC Crackdown on Cryptocurrency traders

HMRC Crackdown on Cryptocurrency traders

In recent years, more and more people have invested in cryptocurrency, with some making instant gains of thousands and some losing everything.

Since April 2022, HMRC asked many of the cryptocurrency exchanges to register with HMRC with a view that HMRC will have direct access to some of the sophisticated traders, who are making several thousand pounds without declaring this as income.

In last three years HMRC have been collecting data from various exchanges of people investing in cryptocurrencies, and have in since September 2023, with targeted campaign have written to 8,392 individuals (source: UHY Thacker Young) to declare their trading activities on a self assessment return as self employed/ sole trader income.  Please note that if people don’t declare what they are required to and HMRC subsequently discover that additional tax was due, HMRC will penalise the individuals with tax-geared penalties of up to 100% of Tax as well as interest.

HMRC have also issued guidance to explain that anyone paying salaries in crypto, giving crpto assets as gifts, even donating to charities, exchanging other goods for crpto, etc.

For people holding cryptoassets as long term investment, they are liable for Capital gains Tax on the profit element, for regular traders who buy and sell cryptocurrencies and hold assets for a matter of days at the most, this will be classed as traders and will be subject to income tax and class iv NIC if there profits exceed £9,567.

HMRC have made certain allowances via their voluntary disclosure scheme, but will not remain tolerant for long, as they look to clamp down, with heavy penalties which are in addition to any tax owed.

From April 2027, OECD’s Crypto-Asset Reporting Framework comes into effect, meaning that HMRC will have access via all crypto platforms to individual transactions.

To make voluntary disclosure, here is the link, https://www.gov.uk/guidance/tell-hmrc-about-unpaid-tax-on-cryptoassets

To pay any tax owed on crypto profits, https://www.gov.uk/guidance/pay-tax-on-cryptoassets

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