Britons will be forced to declare any gains from crypto assets after the government announced it will reform tax forms, ahead of moves to reduce the capital gains tax-free allowance.
The Treasury confirmed on Wednesday that from 2024-25, self-assessment tax return forms will feature a separate section for individuals and trusts that have disposed of crypto assets. Currently, sales of cryptocurrencies are reported along with “other” assets and a range of exemptions.
According to the Office for Budget Responsibility, the proposals are forecast to raise around £30mn for the Exchequer between 2025-28 due to “expected increases in declared CGT liabilities”. The timing of the changes will also coincide with significant cuts to the capital gains allowance to £3,000 for individuals and £1,500 for most trustees by 2024-25.
“The changes will make it harder for investors to evade reporting requirements and enable tax authorities to cross-reference customer details with other information they receive,” said Dion Seymour, crypto and digital assets technical director at tax consultancy Andersen LLP. Customs policy lead on crypto assets.
The move aims to simplify tax forms to encourage tax compliance, as ministers press ahead with efforts to transform the UK into a global crypto hub through a set of planned reforms.
In February, the Treasury Plans announced Many lenders and exchanges ran into difficulties due to new rules governing the issuance, lending and trading of crypto tokens in an effort to improve transparency in transactions and consumer protection measures amid market volatility.
In a research paper published last July, HMRC found that 45 per cent of people surveyed had sold crypto assets, with an 8 per cent group reporting that they had made a profit in excess of the current £12,300 CGT allowance. About 8 percent of UK adults own crypto assets, according to the survey.
Christopher Thorpe, technical officer at the Chartered Institute of Taxation, a professional body, previously said the government should “definitely” upgrade the filing form with a separate box for crypto, as well as provide improved guidance on applying tax rules to digital assets. .
It is estimated that in 2021, cryptocurrency profits in the UK could reach $8.16 billion, according to Blockchain Research Group. Chain analysis. This US Then came second and indicates the extent of crypto gains realized by investors, which are unlikely to be fully disclosed.
According to HMRC, a third of crypto holders reported having a good understanding of capital gains requirements. About 37 percent said they knew “a little”, while more than one in five were “not at all familiar”.
“Isolating crypto assets on the capital gains pages of self-assessment forms from 2024-25 seems like a smart move and will hopefully help HMRC better understand crypto receipts. . . and helps avoid unnecessary taxpayer confusion,” said Mike Hodges, partner at accountancy firm Safary Champness.
More people exchanging crypto for fiat currency are now likely to receive taxable returns following the chancellor’s decision in November to cut the capital gains tax-free allowance from £12,300 to £6,000 in the 2023-24 financial year, and it will be halved again from April. 2024.
“The tax rules for crypto assets are still confusing and lagging behind innovation in the sector,” said Marcus Foster, head of crypto policy at lobby group Coadec. “HMRC should ensure that these rules reflect how the technology actually works – which is not currently the case.”
