U.K. Government Warns of Penalties for Unpaid Taxes From Crypto, NFT and Utility Token Holdings
In an effort to tighten its control over unpaid crypto taxes, the UK government is urging cryptocurrency users to voluntarily disclose their capital gains or income related to digital assets such as cryptocurrencies, non-fungible tokens (NFTs), and utility tokens.
In an announcement published on Nov. 29, the HM Revenue & Customs has advised crypto holders in the UK to voluntarily report their unpaid capital gains and income taxes from digital assets to avoid potential penalties.
In the guideline, crypto asset holders are being urged to carefully assess the extent of their unpaid crypto taxes. The number of years to disclose depends on the degree in which the individual has notified authorities or paid previous taxes.
Those who have taken “reasonable care” in managing tax affairs will need to pay taxes for 4 years, while those who “did not take care” have to pay what they owe for 6 years. Meanwhile, individuals that “deliberately misled HMRC” will have to pay taxes owed over a maximum of 20 years.
Those who have made a disclosure are granted a 30-day timeframe to pay all outstanding taxes on digital assets. Failure to meet this deadline could result in repercussions, including actions taken by the Treasury to recover unpaid amounts.
As part of the ongoing efforts to improve tax reporting requirements, the UK government intends to introduce a dedicated section in self-assessment tax return forms for cryptocurrency holders to disclose their gains. This planned change, expected to be implemented in the 2024-25 fiscal year, aims to streamline reporting procedures and enable tax officials to more effectively cross-reference customer information.
The UK aims to be a global hub for the cryptocurrency industry. Alongside tax regulations, the UK government has announced its final plans for regulating crypto assets under the Financial Conduct Authority (FCA).
