Crypto transactions to become part of Self-Assessment under new regulations

The Government has announced there will be greater scrutiny on the reporting of all crypto transactions, including for cryptocurrencies and non-fungible tokens (NFTs).

HM Revenue & Customs (HMRC) will now require cryptoasset reporting in Self-Assessment tax returns by requiring separate reporting of gains and income.

The changes will be introduced on the forms for the 2024-25 tax year.

Greater security

The heightened scrutiny of cryptoasset holders becomes more of an issue for taxpayers as a result of the reduction in the tax-free Capital Gains Tax (CGT) Annual Exempt Amount.

After a turbulent year, interest seems to have been renewed in digital currency after major problems in the traditional banking sector.

This saw the bailout of U.S. lenders Silvergate Bank, Silicon Valley Bank and Signature Bank, to be followed by Credit Suisse in Switzerland.

Crypto markets have bounced back in 2023, with a particular enthusiasm for AI crypto tokens and projects.

Tax relief

It is now crucial for investors to make sure they are reporting their crypto correctly, to get their tax right or to take advantage of valuable tax relief on any losses.

Investing in, mining, creating or actively trading cryptoassets means you are likely to be generating taxable income or gains.

The new requirements will allow HMRC to check annual tax reporting against data they receive directly, for example from crypto exchanges and other trading platforms.

Crypto exchanges like Coinbase, Binance or Kraken have provided contact details of those trading in crypto assets for HMRC in recent years.

Disclose data

Under UK regulations, to have UK customers, these exchanges are expected to disclose user data to HMRC.

The rule change also affects crypto investors who have not accessed their cryptoassets.

HMRC says its view is that crypto is situated where the holder is a resident. This means that the remittance basis of taxation will generally not protect crypto gains or income.

Need advice with cryptocurrency and Self-Assessment? Contact us.