Tag: crypto

Many are unaware that crypto investments carry tax implications and can therefore be caught unawares by a ‘nudge letter’ from HMRC. The letter is sent to those taxpayers who HMRC believes need to review their tax affairs and respond accordingly. HMRC is able to send these letters based on information it holds, such as information on UK users from crypto exchanges.

Important things to note in regards to crypto investments and tax include:

• Since crypto assets are considered to be investments, any proceeds from a disposal may be subject to Capital Gains Tax (CGT).
• A disposal for tax purposes also includes the purchase of one crypto asset using another crypto asset. For example buying Ethereum using Bitcoin results in a disposal of Bitcoin.
• Individuals have a CGT Annual Exempt Amount (AEA) in each tax year, currently £6,000. If an individual’s AEA is exceeded when aggregating capital disposals in a tax year, CGT will apply and penalties and interest charges could arise if this has not been dealt with properly.
• Nudge letters should not be ignored – seek professional advice straightaway to determine your next steps.

You can read Danielle and Riocard’s article in full on City AM.

Have you received a letter from HMRC?

It is recommended that taxpayers seek professional advice immediately after receiving a nudge letter or a statutory enquiry from HMRC, or discovering a mistake in their filings. If you have any kind of dispute with HMRC, then please contact Danielle Ford or Riocard Hoye.

We have previously commented on HMRC’s approach to crypto assets here, making those who hold cryptocurrency and crypto assets aware of their obligations in regards to reporting to HMRC. In HMRC’s view, cryptocurrencies are a chargeable asset and should be treated as such. The pitfall often occurs when individuals do not seek professional advice on how their crypto assets could affect their tax position, since multiple transactions and reinvestment could trigger Capital Gains Tax (CGT).

The key takeaway from Danielle’s feature, is that those holding crypto assets are simply not aware of the tax consequences, which is why it’s worth seeking expert advice for any gains or losses made.

You can read Danielle’s answer in full in the FT article here (subscription needed).

If you need further advice, please get in touch with Danielle here.