Be aware of tax obligations when investing in cryptoassets, say tax professionals
Cryptoasset investors should keep up-to-date records to ensure they pay the right amount of tax, the Chartered Institute of Taxation (CIOT) and its Low Incomes Tax Reform Group (LITRG) have warned.
Cryptoassets such as Bitcoin, Ripple and Ethereum are becoming an increasingly popular form of investment for many, but concern remains over the level of public awareness on how and when tax on these investments should be paid.
Since April 2024, the capital gains tax (CGT) annual exemption has fallen to £3,000, down from £12,300 just over a year ago. Anyone who has taxable gains above this amount, including from cryptoassets, must report it to HMRC and pay any necessary tax.
For reporting 2024/25 onwards, tax returns will contain a dedicated section to gains arising from cryptoasset disposals. But the CIOT and LITRG is calling on HMRC and the government to help ensure all those who invest are fully aware of the tax implications, and on investors to make sure they keep proper records.
Gary Ashford, president of the CIOT and chair of the CIOT’s Cryptoassets Working Group, said:
“A dedicated cryptoasset section within tax returns is a definite step in the right direction to ensure relevant transactions are reported to HMRC. However, those who might need to report cryptoasset activity on their 2024/25 tax return will need to make sure that they have adequate records to do so.
“Furthermore, with the reduction of the CGT annual exemption to £3,000, an historic low, many more people will find themselves within the obligation to report and pay CGT for the first time. We are concerned that these individuals will simply not be aware of this requirement and will be hit by unexpected HMRC tax and penalty charges, perhaps several years later, which will come as an unpleasant surprise.
“We call on HMRC to go to greater efforts to make the public aware of their tax obligations surrounding cryptoasset investments and of the lower CGT annual exemption. This includes ensuring people are aware of the need to keep proper records when they start investing in cryptoassets. We are keen to continue working with HMRC on its plans around the taxation of cryptoassets and decentralized finance more widely.
“By making sure as many people as possible are warned of their tax obligations, HMRC will make it more likely that these people pay their taxes, saving themselves having to chase overdue tax.”
The Chartered Institute of Taxation (CIOT)
The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.
The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries. The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.
The CIOT’s 20,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.
Low Incomes Tax Reform Group
The LITRG is an initiative of the Chartered Institute of Taxation (CIOT) to give a voice to the unrepresented. Since 1998, LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes.
The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. The CIOT’s 20,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.