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October 27, 2022
by  Josh Sab

Tax and Cryptocurrencies

Cryptoassets have become a hot topic at the moment and are considered one of the best investment options available in the market despite the fact these are not regulated and carry huge risks, not to mention the many scams happening in the Crypto world. Even though Crypto Assets take many forms, Cryptocurrencies are widely known, especially the major players such as Bitcoin and Ethereum. 

This article is not intended to discuss the various types of Crypto Assets, we will leave that to the tech experts. As Accountants and Tax advisors we would like to discuss the Tax issues on Crypto trading. 

Lots of Crypto traders assume the gains made on Crypto are not taxable. This is incorrect, Crypto trading income is taxable, the question is which tax regime it falls into. The two main taxes related to Crypto trading are Capital Gains Tax (CGT) and Income Tax.

Back in 2019, a few Crypto exchanges reported that HMRC had requested they provide information on the clients involved in Crypto trading. This clearly shows HMRC intends to get in touch with the Crypto traders at some point to collect the taxes due. 

Nearly a year ago, the Chartered Institute of Taxation published an article confirming HMRC had begun sending out letters to Crypto traders educating them about the tax implications of Crypto trading. 

As of today, there are no Tax laws governing Crypto tax. The only official resource we have is the HMRC Manual on Crypto Assets. 

Based on the manual most of the Crypto Trading income will be taxed under the Capital Gains Tax regime. However, Crypto mining may fall into the income tax regime. 

If you are in Crypto trading, you should speak to an advisor to understand your tax liabilities. If you think you have taxes to pay and never did, you may be better off doing a voluntary disclosure and paying the taxes due. It’s a general rule that there will be penalties on any unpaid taxes. However, if you make an unprompted disclosure to HMRC (you inform HMRC before they come to you), HMRC may waive the penalties. 

We are happy to help if you have any questions regarding Crypto Taxes or if you would like to disclose any unpaid Tax to HMRC in the most efficient manner. 

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