Cryptocurrency investors under HMRC scrutiny
HMRC has obtained information about those who have bought or sold cryptocurrencies and says it will be writing to them in November. How should someone respond if they receive a letter?
HMRC has said it will send so-called “nudge letters” to anyone for whom it’s been sent information from cryptocurrency brokers. It says the purpose of the letters is to remind taxpayers “to review their transactions to ensure that they are declared correctly”.
Any difference in the buying and selling price of cryptocurrencies is generally subject to the capital gains tax rules, either as a taxable gain or loss. Tax will only be payable where all capital gains less capital losses for the year exceed the annual exemption. However, transactions should be reported on self-assessment tax returns if their value exceeds certain limits or losses were made.
In some circumstances buying and selling cryptocurrencies counts as trading income in which case any amount of profit (or loss) is subject to income or corporation tax rules and must be reported to HMRC.
Information from HMRC about when cryptocurrency capital gains or losses should be declared is available here. For HMRC’s detailed guidance on the taxation of cryptocurrency transactions look here.
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