HMRC’s Crypto Crackdown – What You Need to Know

With the January 31st self-assessment deadline looming, HMRC has initiated a targeted campaign aimed at crypto investors to ensure a clear understanding of tax obligations related to Cryptoassets for the tax year 22/23.

 HMRC are taking a proactive stance in an evolving tax landscape. Over the past three years HMRC has identified potential taxpayers in the crypto space, and has dispatched over 8,000 'nudge' letters, emphasising the importance of compliance. If you've received one of these letters, consider it a courteous reminder to review your crypto activities and ensure compliance with the tax regulations.

For the tax year 22/23, any gains made over the tax-free threshold (£12,300) require declaration, with the corresponding Capital Gains Tax duly paid. This encompasses various forms of crypto disposals, including exchanging, gifting and paying for goods and services.

Likewise any crypto earned from airdrops, staking, and mining are considered taxable income, although there is a £1,000 tax-free allowance against this too.

Looking ahead, HMRC is streamlining the reporting process by introducing a dedicated crypto section in self-assessment tax returns starting from the tax year 24/25. This will simplify the declaration of crypto income and gains and ensure a more straightforward compliance process. This is very well-timed to correspond with the reduction in the tax-free Capital Gains Tax allowance, tapering down from 23/24 and further in 24/25.

Additionally, HMRC has established a voluntary disclosure service, providing an opportunity for taxpayers to rectify any underreported income or gains associated with Cryptoassets. Disclosures made through this service may be subject to more lenient penalties compared to HMRC's independent discoveries.

As we navigate this evolving terrain, it's essential to stay informed about your tax obligations. If you are uncertain or have received a 'nudge' letter from HMRC, our experts are here to provide professional guidance. Don't hesitate to reach out – ensuring compliance is not just a legal requirement but a prudent step to avoid financial penalties and legal consequences.

Contact our Crypto accounting specialist Aaron Scrupps at crypto@upstreamly.com to discuss.