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HMRC has sent a total of 8,329 “nudge” letters to individuals suspected of owing tax on cryptocurrency assets, according to UHY Hacker Young.
The news comes as HMRC has been collecting data on cryptocurrency investors from crypto exchanges for at least three years.
According to the government department, some crypto investors may not be aware that they owe capital gains tax on the sale of their digital assets, or even income tax on their holdings if HMRC deems them to be traders of crypto.
As a result, traders could be subject to income tax if they mine cryptocurrency, gain interest from “staking” their cryptocurrency, receive “airdropped” crypto or trade significant amounts of it regularly.
UHY Hacker Young believes that HMRC will be keen to target crypto as a source of tax revenue, as 4.97 million people in the UK are believed to own some cryptocurrency as of 2022.
The recent dramatic price rally in cryptocurrencies, with Bitcoin up over 140% in the past year, is also likely to have moved taxing crypto incomes and gains up the priority list for HMRC.
Neela Chauhan, partner at UHY Hacker Young, said: “HMRC is only going to become more determined to intensify its tax crackdown on crypto investors in the next few years. As HMRC gains access to more data, crypto traders will no longer be able to evade the tax authority’s attention.
“Non-compliance may arise because crypto investors do not know what tax they owe on their digital assets. While HMRC is willing to offer some forbearance in the short term, such as through its voluntary disclosure mechanism, it is unlikely to be so tolerant for long.”
In December 2023, HMRC launched a voluntary disclosure mechanism to encourage crypto investors to inform the tax authority of any unpaid tax on income or gains made from their crypto assets. Anyone coming forward to declare unpaid taxes would receive a reduced penalty.
