The UK's tax authority, Her Majesty’s Revenue and Customs (HMRC), has issued strict guidelines instructing cryptocurrency users in the country to declare and pay taxes on their digital assets within specified timeframes. HMRC recently published guidance on how to report and pay tax on cryptocurrency assets, which starts with a clear cautionary message. It warns users that failure to report unpaid taxes could lead to additional interest charges and penalties.
According to HMRC, the duration taken to settle outstanding tax liabilities will be contingent upon the reasons behind the delay in paying taxes. Taxpayers are given three options to choose from when disclosing their reasons for non-payment: whether it was due to lack of caution, intentional avoidance, or an intention to pay that somehow fell through.
Users who intended to pay but failed to do so will owe HMRC taxes for the preceding four years. Those deemed less cautious will be required to pay taxes for the last six years, while individuals deliberately evading taxes will need to settle taxes on all cryptocurrency holdings from the past 20 years. Additionally, HMRC emphasizes that interest will accrue daily from the tax due date until the full payment is made. Any discrepancies in disclosing the correct interest will result in the denial of the disclosure.
Upon reporting unpaid taxes, users will receive a payment reference number and will be given a 30-day window to remit the total outstanding amount. The disclosure must encompass various digital assets categorized as "exchange tokens," including Bitcoin, as well as non-fungible tokens (NFTs) and "utility tokens."
HMRC treats cryptocurrencies akin to most other financial assets, subjecting them to Capital Gains Tax (CGT). The CGT rate currently ranges from 10% to 20%, depending on an individual's income and gains. Detailed information regarding UK tax regulations pertaining to cryptocurrencies is available for further reference.
