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UK Issues Crypto Tax Warning: Declare Taxes or Face Penalties

Policy The United Kingdom's tax authority, His Majesty’s Revenue and Customs (HMRC), has issued a stern warning to individuals holding cryptocurrencies, non-fungible tokens (NFTs), and utility tokens, emphasizing the imperative of timely tax declaration and payment. In guidance released on November 29, HMRC underscores the potential consequences for those failing to adhere to the specified
The United Kingdom’s tax authority, His Majesty’s Revenue and Customs (HMRC), has issued a stern warning to individuals holding cryptocurrencies, non-fungible tokens (NFTs), and utility tokens, emphasizing the imperative of timely tax declaration and payment. In guidance released on November 29, HMRC underscores the potential consequences for those failing to adhere to the specified timeframe, stating:

“If you do not contact us to declare your unpaid tax, you could be liable to additional interest and penalties.”

HMRC outlines a structured approach for users to rectify their tax obligations based on the circumstances surrounding their non-compliance. Taxpayers are presented with three options, prompting them to acknowledge whether their lapse was due to insufficient care, deliberate evasion, or an intent to pay that somehow went awry.

For those who intended to pay but faltered, HMRC requires payment for the preceding four years. Individuals deemed less careful in their tax affairs face an obligation for the last six years, while deliberate tax evaders may be held accountable for taxes on all crypto assets held in the past two decades.

Emphasizing the financial implications of delayed payment, HMRC underscores the daily accrual of interest from the due date until settlement. Any failure to accurately incorporate the accrued interest in the disclosure may result in the rejection of the submission.

Upon disclosing unpaid taxes, users receive payment reference numbers and a 30-day window to remit the entire outstanding sum. The comprehensive disclosure encompasses various digital assets, including “exchange tokens” like Bitcoin, non-fungible tokens (NFTs), and utility tokens.

HMRC aligns its treatment of cryptocurrencies with traditional financial assets, subjecting them to Capital Gains Tax (CGT). The applicable CGT rates range from 10% to 20%, contingent on the individual’s income and gains. This move aligns with the broader regulatory landscape, highlighting the UK government’s commitment to ensuring tax compliance within the rapidly evolving digital asset space.

Wasif Shakir

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