Krypto must be added to tax forms for self-assessment

Britons will be pressured to declare any gains from crypto assets after the government announced it would change tax forms, ahead of moves to cut tax-free allowances for capital gains.

The Treasury confirmed on Wednesday that from 2024-25 tax return forms will include a stand-alone section for individuals and trusts that had disposed of crypto assets. Currently, the sale of cryptocurrencies is reported along with a variety of “other” assets and reliefs.

The proposals are forecast to raise around £30m for the Exchequer between 2025-28 due to an “expected increase in declared CGT liabilities”, according to the Office for Budget Responsibility. The timing of changes will also coincide with a significant cut in the capital gains allowance to £3,000 for individuals and £1,500 for most trustees by 2024-25.

“Changes will make it more difficult for investors to overlook reporting requirements and enable tax authorities to cross-reference customer details with other information they receive,” said Dion Seymour, technical director of crypto and digital assets at tax consultancy Andersen LLP, and former HM Revenue & Customs policy director on crypto assets.

Moves are aimed at simplifying tax forms to encourage tax compliance, as ministers step up efforts to transform the UK into a global crypto hub through a set of planned reforms.

In February, the Treasury announced plans for new rules for issuing, lending and trading crypto tokens in a bid to improve transaction transparency and customer protection measures amid market volatility that had left several lenders and exchanges in trouble.

In a research paper published last July, HMRC found that 45 per cent of respondents had sold crypto-assets, with 8 per cent of the group reporting that they had crystallized profits in excess of the current £12,300 CGT allowance. Around 8 percent of the UK’s adult population owned crypto assets, according to the survey.

Christopher Thorpe, technical officer at the Chartered Institute of Taxation, a professional body, previously said the government should “absolutely” upgrade filing forms with a separate box for crypto, as well as provide revised guidance on the application of tax rules to digital assets.

An estimated $8.16 billion in cryptocurrency profits were realized in the UK in 2021, according to blockchain research group Chainanalysis. This was second only to the US and signaled the extent of crypto gains realized by investors, which were unlikely to be fully disclosed.

A third of those holding crypto reported having a good understanding of capital gains requirements, according to HMRC. Some 37 per cent said they knew “a little”, while more than one in five were “not at all”.

“Separating crypto assets on the capital gains pages of self-assessment forms from 2024-25 seems like a smart move and one that will hopefully help HMRC better understand crypto receipts . . . and help avoid unnecessary taxpayer confusion,” said Mike Hodges, partner at accountancy firm Saffery Champness .

More people exchanging crypto for fiat currency are now likely to make taxable returns following the chancellor’s decision in November to cut the capital gains tax-free allowance from £12,300 to £6,000 in the 2023-24 financial year, and halve it again from April 2024.

“Crypto-asset tax rules remain confusing and continue to lag behind innovation in the sector,” said Marcus Foster, head of crypto policy at lobby group Coadec. “HMRC needs to ensure that these rules reflect how the technology actually works – which is currently not the case.”