UK’s HMRC is Sending Out ‘Nudge Letters’ to Crypto Tax Slackers

Crypto Reporter

Shalini Nagarajan

Crypto Reporter

Shalini Nagarajan

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Shalini is a crypto reporter who provides in-depth reports on daily developments and regulatory shifts in the cryptocurrency sector.

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Last updated:

August 8, 2024 22:17 EDT

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The UK’s HM Revenue & Customs (HMRC) is reminding investors to disclose and pay tax on any crypto gains they may have overlooked.

The agency has begun sending out letters to investors who may have neglected to report or pay taxes on profits from selling crypto assets. This is just the first wave, with more letters expected to be mailed out next month.

It clarified that income generated from lending, staking, and mining cryptocurrencies is subject to taxation. Additionally, crypto earnings from employment are also taxable. Investors who fail to declare past crypto gains could face penalties, including interest on late tax payments.

Crypto Gains Liable for Taxation

According to tax consultancy BDO, HMRC considers profits or losses from buying and selling crypto subject to Capital Gains Tax (CGT). BDO said that HMRC rarely recognizes crypto trading as a trade for tax purposes, implying that CGT is generally applicable.

Further, individuals who have made money from selling cryptocurrency during the year may owe taxes. They should be prepared to report their crypto transactions and potentially file a return.

“Many owners of crypto assets may not be fully aware of their obligations and may not have filed a tax return before,” BDO tax partner Paul Falvey said. “They could well get a shock when this letter hits the doormat – but the worst thing they could do is to ignore it.”

UK Regulators Enforce Tax Compliance, Set New Advertising Standards

HMRC earlier initiated a crypto tax disclosure campaign last year. This marked the first time the tax authority offered a dedicated process for individuals to disclose and rectify unpaid taxes. These assets included exchange tokens, NFTs, and utility tokens.

The UK enforces some of the strictest regulations for crypto companies, especially concerning advertising and registration.

This week, the Financial Conduct Authority (FCA) released new promotional guidelines for crypto firms. This followed an evaluation of their compliance with financial promotion regulations. The regulator outlined both effective and inadequate practices observed in various firms. These observations have been included in a new guide designed to help the industry meet compliance standards.