HMRC targets crypto traders - Naail & Co (2024)

FAQs

What is the HMRC letter for crypto? ›

If HMRC believe you have made undisclosed profits on cryptocurrency and owe them tax, you may be sent a 'nudge' letter from them. To date 8,329 of these letters have been sent out from HMRC, and they've been very busy collecting data from crypto exchanges for the past three years in order to obtain this intel.

HMRC gathers information from a wide range of sources. It can pull information directly from cryptoasset exchanges and can also use international tax treaties to gather data.

Yes. In the UK, your transactions on Crypto.com or other platforms are subject to capital gains tax and ordinary income tax. If you've earned or disposed (ex. Sold or traded away cryptocurrency) during the year, you'll have a tax liability to report to HMRC.

Everyone in the UK has a Capital Gains tax-free allowance of £12,300. So if your crypto profits are under £12,300, you won't need to pay Capital Gains tax or report your crypto profits. If you sell your crypto for more than you bought it, you'll need to pay Capital Gains tax on the difference (profits).

HMRC can also seize assets as part of their investigations into civil or criminal wrongdoing. They have wide-ranging powers of search and seizure, extending to intangible assets such as crypto currency. This may give way to a forfeiture notice, which can be issued without the need for a prosecution.

You may have to report transactions with digital assets such as cryptocurrency and non-fungible tokens (NFTs) on your tax return. Income from digital assets is taxable.

Among other requirements, it mandates that crypto platforms, such as Coinbase and Gemini, report taxpayer information to HMRC and other European tax authorities.

Yes, the IRS can track cryptocurrency, including Bitcoin, Ether, and a huge variety of other cryptocurrencies. The IRS does this by collecting KYC data from centralized exchanges.

Yes. Trading one cryptocurrency for another is subject to capital gains tax. You will incur a capital gain or loss depending on how the price of the crypto you're trading away has changed since you originally received it.

If you're holding crypto, there's no immediate gain or loss, so the crypto is not taxed. Tax is only incurred when you sell the asset, and you subsequently receive either cash or units of another cryptocurrency: At this point, you have “realized” the gains, and you have a taxable event.

Can the gov track crypto account? ›

Authorities such as the police, the US Federal Bureau of Investigation, or the US Internal Revenue Service (IRS) rely on public cryptocurrency transactions to track individuals and organizations that evade taxes or use cryptocurrencies.

What affects your crypto taxes? For US taxpayers, the key factor affecting tax on crypto gains is whether a profit was realized in the short or long term. Long-term tax rates on profits from tokens held for a year or longer peak at 20%, whereas short-term capital gains are taxed at the same rate as income: 10-37%.

If you own cryptocurrency for one year or less before selling, you'll pay the short-term capital gains tax. Short-term capital gains taxes are higher than long-term capital gains taxes.

The IRS treats cryptocurrencies as property for tax purposes, which means: You pay taxes on cryptocurrency if you sell or use your crypto in a transaction, and it is worth more than it was when you purchased it. This is because you trigger capital gains or losses if its market value has changed.

Yes, you can write off crypto losses on taxes even if you have no gains. If your total capital losses exceed your total capital gains, US taxpayers can deduct the difference as a loss on your tax return, up to $3,000 per year ($1,500 if married filing separately).

For example, an investor who held a digital asset as a capital asset and sold, exchanged or transferred it during 2023 must use Form 8949, Sales and other Dispositions of Capital Assets, to figure their capital gain or loss on the transaction and then report it on Schedule D (Form 1040), Capital Gains and Losses.

Any cryptocurrency capital gains, capital losses, and taxable income need to be reported on your tax return. You can report your capital gains and losses on Form 8949 and your income on Form 1040 Schedule 1 or Schedule C depending on your situation.

Andersen LLP is a London-based award-winning crypto tax and advisory firm providing personal, corporate, and international tax advice to Web3 clients.

The most common use of crypto is as an investment, in which case the crypto asset is a capital gains tax (CGT) asset. If you acquire a crypto asset as an investment, transactions such as disposal or exchange or swap are a CGT event and you may make a: capital gain. capital loss, which can reduce capital gains you make.