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HMRC tax on crypto coming for UK: will it effect Bitcoin’s bull run?

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HMRC tax on crypto coming for UK: will it effect Bitcoin’s bull run? By Invezz

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Published Dec 07, 2023 07:55
Updated Dec 07, 2023 08:41

HMRC tax on crypto coming for UK: will it effect Bitcoin’s bull run?

UK cryptocurrency enthusiasts beware: recent signs from the revenue service point to an incoming tax on crypto. So, what does it mean for you?

For years now, traders and investors in the UK have not had to pay a specific cryptocurrency tax on any profits made from their positions. Instead, it’s been business as usual, with a taxable Capital Gains or Stamp Duty amount paid whenever cryptos are bought, sold or spent within the country.

However, that’s now set to change.

On November 29th, the government issued a statement named, unambiguously, ‘Pay tax on cryptoassets’. As of now, holders and traders of cryptocurrencies can make a declaration to HM Revenue and Customs with a new voluntary facility.

It’s a chance to freely declare before the whip comes down, according to United Kingdom taxation specialists Pinsent Masons, who wrote on December 6th on their website that:

The launch of this facility comes only a few weeks after the UK government announced its intention, alongside the US, Ireland, and other nations, to implement the cryptoasset reporting framework (CARF), which is a new international standard on automatic exchange of information between tax authorities developed by the OECD. The UK expects to implement it so that exchanges of information can occur from 2027.

When interviewed by Invezz, senior Pinsent Masons forensic accountant Hinesh Shah explained it further.

CARF will provide for the automatic exchange of information between tax authorities on crypto exchanges for the purpose of combating offshore tax avoidance and evasion. As a signatory, the UK, starting in 2027, will receive information on individuals’ crypto trading from platforms. While it may not deter UK crypto investors, HMRC gains increased visibility for potential enforcement against those who haven’t paid taxes on crypto trading, especially with the voluntary disclosure facility now available.

Shah urged people to take advantage of the chance to come clean voluntarily – while they still can.

Those who have ‘dabbled’ in crypto should embrace the opportunity to pay the taxes that were due whenever a taxable event arose through their crypto trading activities. Voluntary disclosure might incur some late interest, but once paid, HMRC is unlikely to impose additional penalties unless the tax amount is deemed insufficient. Where individuals have complex tax computations, they should consider seeking specialist advice.

Cryptocurrencies – and Bitcoin in particular – have been riding on a high lately, as excitement mounts for the believed imminent approval by the SEC of BlackRock’s Bitcoin spot price ETF.

So, will this new tax dampen the Bitcoin fever? According to Shah, no:

Despite a nearly 150% increase in the past year, Bitcoin remains significantly below its peak of £48k in November 2021 (currently £35k). Cryptocurrencies are taxed like traditional stocks, and there’s little indication of imminent changes. The allure of quick profits from crypto trading, fueled by its volatility, is likely to persist.”

This article first appeared on Invezz.com

HMRC tax on crypto coming for UK: will it effect Bitcoin’s bull run?

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