UK Crypto Users Face New HMRC Tax Compliance Demands
In a significant move by the UK’s tax authority, Her Majesty’s Revenue and Customs (HMRC) has issued a firm directive to cryptocurrency users. This announcement, which has critical implications for UK crypto hodlers, centers on declaring and paying taxes on digital assets within a designated timeframe.
UK Crypto Tax Compliance Terms Defined
The HMRC’s latest guidance outlines the consequences for those who fail to comply. According to the HMRC, the duration within which unpaid taxes must be settled depends on the reason for the initial non-payment. Cryptocurrency users who have unintentionally overlooked their tax obligations will be liable for the past four years. The period extends to six years for those who have demonstrated a lack of care in their tax dealings. However, deliberate tax evaders face the most severe scrutiny, with HMRC demanding tax payments for up to 20 years.
This directive also emphasizes the importance of including exchange tokens like Bitcoin, non-fungible tokens (NFTs), and utility tokens in the disclosure. As digital assets are treated similarly to other financial instruments, they fall under the Capital Gains Tax (CGT) bracket. The CGT rates vary from 10% to 20%, influenced by an individual’s income and the size of their gains.
Crypto Tax Errors Lead to Penalties
The HMRC has clearly stated that failure to declare and pay taxes on crypto holdings will lead to additional interest and penalties. The interest, which accrues daily from the due date until full payment, adds an extra layer of urgency to this issue. It is important to note that any tax on previous-year crypto holdings now considered late will automatically incur this interest. Disclosures that do not accurately include this interest will be rejected.
Upon completing the disclosure process, taxpayers will receive payment reference numbers and have 30 days to settle their dues. The HMRC’s recent publication serves as a crucial reminder for UK crypto hodlers to be vigilant and compliant with tax regulations to avoid punitive measures.
Read Also: 79% Cryptocurrency Holders In UK Are Men, Reports FCA
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