Tax season is here in the U.K. — and it’s time crypto investors buckled down to file their cryptocurrency tax returns correctly. There have been a lot of indications that the U.K.’s Her Majesty’s Revenue and Customs (HMRC) is starting to take a stern view of crypto tax evaders.
The first cryptocurrency guidance was released back in 2018[1] after a special report was submitted[2] by the Cryptoassets Taskforce — an initiative launched by the HMRC in collaboration with the Financial Conduct Authority (FCA) and Bank of England. These guidelines clarified some important details about how HMRC views cryptocurrencies, which many see as a prelude to a stricter approach toward crypto taxation.
HMRC also sent requests to some major crypto exchanges[3] (including Coinbase) for information about their U.K.-based investors in August of 2019. This is exactly what the United States’ IRS did before they sent out warning letters to suspected crypto tax evaders.
All this is to say that HMRC looks to be fairly serious about crypto tax evasion — which means that tax filings will become especially important this year. Here are some of the most important things you should know about crypto taxes in the U.K.
Cryptocurrency Is an Asset
For all practical purposes, cryptocurrency is a digital currency. However, when it comes to taxation, HMRC looks at cryptocurrency as an asset. This means that disposal of crypto is subject to Capital Gains Tax. This categorization is being widely adopted by tax agencies; even the U.S.’s IRS views[4] cryptocurrency as property[5] for tax purposes instead of a currency.
When Are Crypto Transactions Taxable?
HMRC says that you need to pay capital gains tax on every disposal of cryptocurrency. Disposal here refers to the following:
