The United Kingdom’s (UK) crypto users find themselves at the crossroads of innovation and regulatory scrutiny. As the digital asset space continues to grow, so does the attention of tax authorities seeking to ensure compliance with fiscal regulations.
The latest development comes in the form of new tax penalties imposed by the UK’s HM Revenue & Customs (HMRC), leaving many crypto users on the edge, questioning their financial standing and potential liabilities.
UK’s HMRC sets nets on unpaid crypto taxes
His Majesty’s Revenue and Customs (HMRC) has given a firm order to crypto users in a significant move by the UK’s tax authorities. This announcement, which has serious ramifications for UK crypto investors, focuses on declaring and paying taxes on digital assets within a specific timeline.
HMRC says that the amount of time customers have to pay back taxes depends on the reason they did not pay earlier. It asks taxpayers to choose one of three options and admit whether they were careless, purposefully avoided paying, or planned to pay but were unable to do so.
Make a voluntary disclosure of any unpaid tax if you have income or gains from cryptoassets, including exchange tokens, NFT’s and utility tokens […] If you do not contact us to declare your unpaid tax, you could be liable to additional interest and penalties.UK’s HMRC
Users who wanted to pay but did not do so will owe the UK’s HMRC the amount for the past four years. The less diligent taxpayer must pay for the past six years, while the deliberate tax evader must pay for everything crypto kept for up to the previous 20 years.
Crypto taxation state in the UK
Because digital assets are classified similarly to other financial instruments, they are subject to Capital Gains Tax (CGT). CGT rates range from 10% to 20%, depending on an individual’s income and the extent of their profits.
The HMRC has said unequivocally that failure to declare and pay taxes on crypto assets will result in additional interest and penalties. The interest, which accrues daily from the due date until complete payment, adds an extra element of urgency to this issue.
It is vital to remember that any tax on previous-year crypto holdings that are now considered late would automatically incur this interest. Disclosures that do not adequately reflect this interest will be rejected.
Users who have previously disclosed crypto taxes to the UK Treasury have 30 days from the date of disclosure to complete all required payments. If the deadline is missed, the Treasury will take efforts to reclaim the funds, and users may face penalties, according to the article.
The upcoming crypto hub has been clarifying its position on crypto taxation. The Treasury issued a guidebook in 2021 to help UK crypto holders in paying taxes, and the UK declared in March this year that persons would have to report their crypto separately in tax forms.
The HMRC’s latest announcement serves as an important warning for UK crypto hodlers to be alert and comply with tax legislation in order to avoid severe penalties.
The demand for revenue made in crypto comes as the crypto market enters the bull run. At the time of writing, Bitcoin is currently trading at $37,736.26, with a 24-hour trading volume of $26,438,618,710.77. This is a 0.10% increase in the last 24 hours and a 3.43% increase in the last 7 days.
The global crypto market cap is now $1.48 trillion, a 0.46% increase over the last 24 hours and a 70.31% increase over a year ago. Bitcoin (BTC) has a market cap of $739 billion as of today, signifying a 49.83% market dominance. Meanwhile, the market cap of stablecoins is $130 billion, accounting for 8.74% of the total crypto market cap.