UK crypto hodlers get a call from the tax grinch
Her Majesty's Revenue and Customs (HMRC) has ordered crypto users in the UK to declare and pay their tax on digital assets within a strict time frame or face the consequences. HMRC's guidance on how to report and pay tax on crypto holdings, published on 29 November, begins with a clear warning:
“If you do not contact us to report your unpaid taxes, you may be liable for additional interest and penalties.”
HMRC explains why the amount of time consumers are given to pay unpaid tax depends on whether they have not paid it before. Taxpayers are asked to choose from three options and admit that they did not exercise due care, deliberately evaded payment or intended to pay but somehow failed.
Beneficiaries who intend to repay but fail to do so owe HMRC repayments for four years. An unscrupulous taxpayer will be held responsible for the last six years of tax evasion accumulated over the past 20 years.
Related: How to manage crypto losses on tax returns in the US, UK and Canada
The tax authority has also reminded the taxpayers of the interest they will have to pay on a daily basis from the date of payment of tax. The additional tax on last year's crypto holdings is now classified as late, indicating interest on the debt. Failure to include the correct need negates transparency.
After reporting unpaid taxes, users will receive payment reference numbers and 30 days to pay the debt in full. The disclosure should include “exchange tokens” such as Bitcoin (BTC), as well as any non-fungible tokens (NFT) and “utility tokens”.
HMRC treats crypto in the same way as most financial assets and subjects it to capital gains tax (CGT). The current rate of CGT ranges from 10% to 20% depending on the individual's income and profits. You can read more about UK tax laws here.
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