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Tax instructions given to crypto users

  • December 30, 2023
  • 2 min read
Tax instructions given to crypto users

His Majesty’s Revenue and Customs (HMRC) has given instructions to crypto users in the UK to declare their taxes and pay on digital assets within a strict time frame or face the consequences. HMRC guidance on how to declare and pay taxes on crypto holdings was published on the 29th November and opens with a clear warning.

“If you do not contact us to declare your unpaid tax, you could be liable to additional interest and penalties.”

HMRC also points out that the amount of time users have to pay outstanding taxes will depend on the reason that they didn’t pay sooner, suggesting that taxpayers can choose from three options to confess whether they either didn’t take enough care, evaded paying deliberately, or intended to pay taxes but failed for other reasons.

Those who intended to but failed will owe HMRC payment for four previous years while the less careful taxpayers will be required to pay for the last six years. Deliberate tax evaders could be liable on all crypto stored for up to the previous two decades.

The tax authority emphasises that taxpayers are subject to daily interest charges starting from the due date of the tax until the full payment is made. Any additional tax on crypto holdings from the previous year is considered late, implying automatic accrual of interest. Failure to incorporate the accurate interest may lead to the rejection of the disclosure. Following the disclosure of any outstanding taxes, users will receive payment reference numbers and must remit the entire amount owed within 30 days. This includes “exchange tokens” such as Bitcoin.

HMRC says that it treats cryptocurrencies in a similar way to most other financial assets. As a result, they are subject to capital gains tax. The current rate ranges from 10-20%, depending on an individual’s income and gains.

If you have made a disclosure but have not received a payment reference number within 15 working days, cannot pay what you owe within 30 days, or have left something important out of the disclosure, you are advised to contact HMRC.

For more information, visit gov.uk

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Emma Trehane

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