The UK’s tax authority, Her Majesty’s Revenue and Customs (HMRC), has issued a stern warning to cryptocurrency, NFT, and utility token holders, emphasizing the need to declare and pay taxes on digital assets within a specified timeframe or face consequences. HMRC’s guidance, released on November 29, includes a clear caution that failure to declare unpaid taxes could result in additional interest and penalties.
HMRC outlines different timeframes for taxpayers to pay outstanding taxes based on their reasons for non-payment. Taxpayers are asked to confess whether they didn’t exercise sufficient care, intentionally evaded payment, or intended to pay but failed. Those who intended to pay but failed will owe taxes for the last four years, while less careful taxpayers will be liable for the last six years. Deliberate tax evaders could face taxes on all crypto assets held for up to the previous 20 years.
The tax authority also underscores the daily interest charged from the due date until the payment is made. As a late payment on previous-year crypto holdings is now considered, interest is automatically implied. Failure to include the correct interest in the disclosure will lead to rejection.
Upon disclosing unpaid taxes, users receive payment reference numbers and a 30-day period to remit the entire owed sum. The disclosure encompasses “exchange tokens,” such as Bitcoin, along with non-fungible tokens (NFTs) and “utility tokens.”
HMRC treats crypto similarly to other financial assets, subjecting it to Capital Gains Tax (CGT), with rates ranging from 10% to 20% based on an individual’s income and gains. The tax rules in the UK classify crypto within the broader framework of financial regulations.
