Even if you haven't received a letter from HM Revenue & Customs (HMRC), UK crypto investors may still owe taxes, experts are warning. While HMRC has been actively sending out "nudge" letters to remind individuals to declare crypto profits, the absence of such a letter doesn't mean you're exempt from tax obligations.
The UK tax authority views cryptoassets as property, not currency. This means that profits from selling, trading, spending, or even gifting crypto (excluding gifts to a spouse) are subject to Capital Gains Tax (CGT). Furthermore, income earned through activities like mining, staking, and airdrops can be subject to Income Tax.
Understanding Taxable Events
Several crypto activities can trigger a tax liability:
- Selling crypto for fiat currency (e.g., GBP)
- Trading one cryptocurrency for another
- Spending crypto on goods or services
- Gifting crypto (excluding to a spouse or civil partner)
- Receiving crypto as payment for services
- Mining crypto
- Staking and lending crypto
- Receiving airdrops (in certain situations)
Tax-Free Allowances and Rates
UK taxpayers have several allowances that can reduce their crypto tax burden:
- Personal Income Tax Allowance: The first £12,570 of income is tax-free (unless you earn more than £125,140 a year).
- Trading and Property Allowance: £1,000 of income from trading is tax-free.
- Capital Gains Tax-Free Allowance: Each taxpayer has a CGT allowance of £3,000 for the 2024/2025 tax year.
Capital Gains Tax rates on crypto profits range from 18% to 24%, depending on your income tax band. For gains realized before October 30, 2024, different rates applied (10% - 20%). Income Tax rates range from 20% to 45%, depending on your income.
Reporting to HMRC
To report crypto taxes, you need to complete a Self Assessment tax return. This can be done online through the Government Gateway service. You'll typically need to fill out the SA100 form and the Capital Gains Summary SA108 form. The deadline for online submissions is January 31st following the end of the tax year, while paper returns must be submitted by October 31st.
What if You Haven't Received a Letter?
Even without a "nudge" letter, you are still responsible for calculating and reporting any crypto-related income or gains. HMRC is increasingly using data from crypto exchanges to track transactions, so failing to report can lead to penalties, including a 20% capital gains tax, interest, and penalties of up to 200% of the taxes due. In serious cases, tax evasion can even result in criminal charges.
Upcoming Changes
From January 1, 2026, UK cryptoasset service providers will be required to collect and report certain identifying details about their users to HMRC. This will further enhance HMRC's ability to track crypto activity and ensure tax compliance. The information that needs to be provided includes full name, date of birth, address, and tax identification number.
Staying Compliant
To ensure compliance with UK crypto tax laws:
- Keep detailed records of all crypto transactions.
- Determine whether each transaction is subject to Income Tax or Capital Gains Tax.
- Utilize available tax-free allowances.
- Report all income and gains to HMRC through a Self Assessment tax return.
- Consider using crypto tax software or consulting with a tax professional.
Ignoring crypto tax obligations can have serious consequences. It's crucial to understand the rules and take proactive steps to ensure you're meeting your responsibilities, regardless of whether you've received a letter from HMRC.
