HMRC Warns Crypto Users to Declare and Pay Taxes on Digital Assets
The UK’s tax office, HM Revenue and Customs (HMRC), has issued a stern warning to cryptocurrency users that they must declare and pay taxes on their digital assets within a strict timeframe or face penalties. The guidance, published by the HMRC on November 29, emphasizes the consequences of not contacting the tax office to declare unpaid taxes, including additional interest and penalties.
Timeframe and Payment Options
The HMRC specifies that the amount of time given to pay outstanding taxes will depend on the reason for non-payment. Taxpayers can choose from three options: admitting insufficient care, deliberate evasion, or failure despite intentions to pay. Those who failed despite intentions will owe payment for four previous years, while less careful taxpayers will have to pay for the last six years. Deliberate tax evaders will be required to pay taxes on all crypto holdings for up to the previous 20 years.
Interest and Penalties
The HMRC reminds taxpayers about the daily interest charged from the due date until the payment is made. As late taxes on previous-year crypto holdings would be classified as late, interest is automatically suggested by the tax service. Incorrect interest calculations may result in rejection of disclosure.
Disclosure Process and Payment
After disclosing unpaid taxes, users will receive payment reference numbers and have 30 days to remit the full amount owed. The disclosure must include “exchange tokens” like Bitcoin, non-fungible tokens (NFTs), and utility tokens.
Crypto Taxation in the UK
The HMRC treats cryptocurrency similarly to other financial assets, subjecting it to Capital Gains Tax (CGT). The CGT rates range from 10% to 20% depending on the individual’s income and gains.
Hot Take: HMRC Issues Stern Warning to Crypto Users Regarding Tax Obligations
The UK’s tax authority, HM Revenue and Customs (HMRC), has made it clear that cryptocurrency users must fulfill their tax obligations by declaring and paying taxes on their digital assets within the specified timeframe. Failure to comply may result in additional interest and penalties. The HMRC provides different options for taxpayers based on their reasons for non-payment, with varying payment periods. It is essential to accurately calculate and include interest when disclosing unpaid taxes to avoid rejection. Once taxes are disclosed, users have 30 days to make full payment. Cryptocurrency is subject to Capital Gains Tax (CGT) in the UK, with rates determined by income and gains.
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