The UK government is moving forward with a plan to improve crypto asset tax compliance. The Treasury has announced that it will include a separate category for crypto assets on its tax return forms beginning in the 2024-2025 tax year. This means that individuals in the UK will be required to report their gains and losses from crypto assets from the previous tax year.
The decision by the Treasury comes as the crypto industry continues to expand and gain acceptance globally. The move will make it easier for UK authorities to monitor crypto-asset transactions and ensure they are adequately taxed.
The government expects the new tax reporting requirements to generate an additional £10 million ($12 million) in revenue each year from the 2025-2026 fiscal year. This revenue boost is a welcome one for the Treasury, looking for ways to plug the financial gap left by Brexit.
The Chartered Institute of Taxation (CIOT) has welcomed the new changes but has expressed concerns about the public’s understanding of capital gains tax (CGT) rules. According to the CIOT, less than one-third of low-income taxpayers correctly understand CGT. The institute calls for more excellent education around the tax rules, particularly for those new to the crypto asset space.
The move by the UK government follows a similar move by the US government, which has also recently taken steps to improve crypto tax compliance. In December 2021, the US Internal Revenue Service (IRS) announced that it would include a new question on its tax form, asking taxpayers whether they had received, sold, sent, exchanged, or otherwise acquired any financial interest in any virtual currency during the tax year.
Overall, the new tax reporting requirements for crypto assets are a positive step towards greater transparency and compliance in the industry. While there may be some initial confusion and uncertainty among taxpayers, the hope is that more excellent education and awareness around the tax rules will help to alleviate these concerns over time.
Moreover, with the increasing mainstream adoption of cryptocurrencies, it’s becoming more important for governments to create clear guidelines and regulations around their use. In the UK, the Financial Conduct Authority (FCA) has already taken steps to regulate crypto-related activities, such as the requirement for crypto firms to register with the FCA and adhere to anti-money laundering regulations.
The new tax reporting requirement for crypto assets is just one step towards a more comprehensive regulatory framework for the crypto industry in the UK. It’s expected that the UK government will continue to work towards creating a more stable and predictable environment for businesses and investors in the crypto space.
However, some critics argue that the new tax reporting requirements may be overly burdensome for individual investors and could deter them from investing in cryptocurrencies. They also say that the government’s estimates of £10 million in additional revenue may be overly optimistic, as tracking and valuing crypto assets is challenging.
Overall, the new tax reporting requirement for crypto assets in the UK highlights the need for clear and consistent regulations in the crypto industry. As cryptocurrencies continue to gain mainstream adoption, governments must balance protecting consumers and investors while promoting innovation and growth in the industry.
