Spring budget reveals closer scrutiny of cryptoassets on the UK Self Assessment Tax Return from 2024/25

UK TAXREGULATION
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Sam Adams
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Sam Adams,
Head of Content

The Spring Budget 2023 has brought about a significant change in the way UK crypto investors will need to report their capital gains. Chancellor Jeremy Hunt announced that from the 2024/25 financial year, investors will be required to declare their cryptocurrency gains separately on the self-assessment tax return. Currently, crypto is grouped into the “other assets” category when reported on the capital gains tax pages.

So, why now? This move recognises the need for clearer regulation in the industry and highlights the government's acknowledgement of crypto's growth. HMRC’s Uptake and Understanding Survey in 2022 found that 10% of UK adults own crypto. Shockingly, it also uncovered that 72% of cryptoasset owners had not seen HMRCs cryptoasset guidance indicating a need for better compliance.

The change to the capital gains page of the tax form is aimed at addressing the tax gap for cryptoassets, making crypto tax more discoverable to taxpayers and ensuring that individuals get tax on their cryptoassets correct. It is expected to raise an additional £10 million in tax revenue and the data collected may be used to inform future policy.

While the tax liability for crypto users remains unchanged, this development suggests that HMRC is cracking down on crypto and actually specifying cryptoassets on the form is likely to increase the number of individuals declaring their crypto gains. The news may even prompt some tax professionals to reassess their stance on crypto and engage in meaningful discussions with clients who they believe may have investments in this area, even if they had previously been hesitant or dismissive.

The Chartered Institute of Taxation has welcomed the change but believes that more still needs to be done. Gary Ashford, Deputy President of the CIOT said:

“Highlighting the need to declare crypto asset transactions in the tax return will help raise awareness of people’s obligations in this area. However much more needs to be done to counter widespread ignorance of tax payment and reporting requirements for crypto”.

As well as the general lack of awareness around taxation of cryptoassets, another concern of the CIOT is the high number of low-income taxpayers who have invested but are not professionally represented or have an understanding of capital gains tax.

In the US all individuals must file a tax return and therefore when the IRS added the crypto question to the tax form they immediately became aware of their obligation to declare their crypto. In the UK, most individuals are taxed by PAYE and have no need to file a self assessment tax return, so many investors could remain unaware of their obligation even with this update to the tax form. We feel that the industry needs to work with HMRC to raise more awareness and education of tax across the space, otherwise there's a risk that many crypto enthusiasts will not report correctly and may be penalised.

Concerned about your crypto tax liability?

Our free crypto tax calculator can help you to determine your capital gains from crypto. For more complicated situations it's best to seek additional help from a tax professional.