HMRC has obtained information about those who have bought or sold cryptocurrencies and says it will be writing to them in November 2021.
How should you respond if you 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”.
Capital Gains Tax (CGT)
If you buy cryptocurrency and then later sell it for more money then this gain is classed as income, it is subject to the capital gains tax rules and should be included in your self-assessment tax return.
Each year you have a CGT allowance and only gains above this level are subject to tax. The current annual allowance is £12,300 and the tax rate is 10% or 20%, depending on whether you are a basic rate of higher rate tax payer in the year of disposal.
Most cryptocurrency brokers provide a portal, which gives reports on your gains or losses, but if you need help working out if you have gains to declare and tax to pay then don’t hesitate to get in touch with the team at a4c.