Crypto investors warned they may need to submit a tax return by 31 January

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published 10 January 2024

HMRC has issued a new warning to crypto users that they may have to file a self-assessment tax return before the 31 January deadline and pay any tax due on gains.

It comes amid concerns that many people who invest in crypto assets, and have benefitted from any income or gains, may be unaware of the tax treatment and their obligations to declare and pay tax on them.

The deadline to complete a tax return for the 2022-2023 tax year and pay any tax owed is 31 January 2024.

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HMRC’s own research published in July 2022 found that one in 10 of the adult population held crypto assets such as NFTs, and cryptocurrencies like Bitcoin or Litecoin.

“People sometimes forget that information about crypto-related income and gains needs to be included in their tax return,” says Myrtle Lloyd, HMRC’s director general for customer services.

“Some people affected may not have had to do a tax return before, so it is important that people check. With the self-assessment deadline just a matter of weeks away, I am urging people not to put off completing it.”

Do I need to submit a tax return if I have crypto assets?

If you have sold crypto for a profit during 2022-2023, you may have reporting and tax obligations, so you should consider whether you need to file a tax return.

It’s also necessary to declare crypto losses if you want to offset those losses in future tax years.

Crypto profits are normally liable for capital gains tax. This means anyone with cryptoassets should declare any gains above the tax-free allowance on their self-assessment return. For 2022-2023, the CGT allowance was £12,300. It is currently £6,000.

HMRC gives the following examples of when tax may be due:

If you received cryptoassets from employment, if they’re held as part of a trade, or are involved in crypto-related activities that generate an income
If you sold or exchanged cryptoassets for money, exchanged one type of cryptoasset for another, or used cryptoassets to make purchases
If you gifted cryptoassets to another person
If you donated cryptoassets to charity

So, if you disposed of cryptoassets and your total taxable gain was above £12,300 in 2022-2023, or if you received cryptoassets from employment and income tax and National Insurance contributions have not been paid through PAYE, you will need to file a tax return.

If you are unsure whether you need to complete a tax return, you can check by using the free online tool on gov.uk.

Dawn Register, head of tax dispute resolution at the accountancy firm BDO, says the warning from HMRC highlights its “growing interest in those people who have made gains from crypto assets but have failed to declare them”.

She adds: “Part of this may be down to lack of knowledge. However, ignorance of the rules won’t give you a free pass.”

What happens if I miss the deadline?

If you have a “reasonable excuse” for missing the 31 January deadline, HMRC may agree to waive any penalties.

However, not knowing that you need to declare and pay tax on crypto investments will not be considered a reasonable excuse.

“If people don’t declare what they are required to and HMRC discovers that additional tax is due, it can charge late payment interest in addition to tax-geared penalties of up to 100% of the tax – or more if the holding was based offshore,” comments Register.

An initial £100 fine, which applies even if there is no tax to pay, is levied on those who miss the self-assessment deadline. The later you file a tax return after the deadline, the bigger the penalty - for example, after three months you could rack up a fine of £900, then after six months, a further penalty of 5% of the tax due or £300, whichever is greater, is imposed.

Watch out for interest on top of your tax bill too, which applies if you miss the deadline. The rate is now 7.75% a year (up from 6% in January 2023 and 2.75% in January 2022).

What should I do if I have undeclared crypto income or gains from previous years?

Last November, HMRC opened a disclosure facility for people needing to declare previously undeclared crypto gains.

This means you can tell HMRC using the online service. It also contains information about how many years you should disclose - this depends on whether you deliberately misled the taxman about your crypto holdings.

If you have an unclaimed loss from the last four tax years then you can claim this by just writing to HMRC.

Ruth is an award-winning financial journalist with more than 15 years' experience of working on national newspapers, websites and specialist magazines.

She is passionate about helping people feel more confident about their finances. She was previously editor of Times Money Mentor, and prior to that was deputy Money editor at The Sunday Times.

A multi-award winning journalist, Ruth started her career on a pensions magazine at the FT Group, and has also worked at Money Observer and Money Advice Service.

Outside of work, she is a mum to two young children, while also serving as a magistrate and an NHS volunteer.