As the January self-assessment tax return deadline approaches in the UK, it’s crucial to understand who needs to file. While primarily associated with the self-employed and those with multiple income sources, anyone with income from rentals, dividends, or side hustles may also need to submit a return. Notably, cryptocurrency trading profits, including earnings from Bitcoin, Ethereum, or NFTs, must be reported like other assets for Capital Gains Tax. Each individual gets an annual CGT allowance, which has recently been reduced. For guidance on filing or disclosing unpaid tax on crypto earnings, it’s best to consult the HMRC website.
The Self-Assessment Tax Return Deadline Approaches: What You Need to Know
As January comes to a close, UK residents must prepare for the looming deadline to file their self-assessment tax return and pay any owed taxes. While self-assessment is usually associated with the self-employed, a broader array of individuals may need to report their financial situations to HM Revenue and Customs (HMRC). This includes anyone earning from rental properties, dividends, or side gigs.
Crypto traders should pay special attention. If you’ve made profits from cryptocurrencies like Bitcoin, Ethereum, or even lesser-known tokens, you are required to declare these earnings on your tax return. Cryptoassets are treated similarly to other assets, meaning if you trade or sell them profitably, you may face potential Capital Gains Tax (CGT) implications.
For those unfamiliar with the rules surrounding cryptocurrency trading, it’s critical to note that any digital asset traded may incur tax liabilities. Even whimsical investments like meme coins can attract taxes if profits are realized. Importantly, if you’ve previously reported these gains through HMRC’s real-time Capital Gains Tax service, you may not need to file a self-assessment for them.
Keep track of your transactions meticulously, especially if you trade often. HMRC can request to see your records during compliance checks. Each financial year, individuals are entitled to a CGT allowance. For the 2023/24 tax year, this is set at £6,000, which will decrease to £3,000 the following year. Additionally, a personal tax-free allowance of £12,750 exists, though many may find this used up by regular salary earnings.
If you’ve only recently discovered that crypto profits are subject to tax, HMRC provides a disclosure tool for unpaid taxes. This allows for a voluntary report of any income or gains from cryptoassets.
In 2024 and beyond, the self-assessment forms will include a specific section for crypto-related asset sales, making tax compliance even easier. Meanwhile, for 2023, crypto earnings still fall under the broader category of “other assets.”
As the deadline approaches, ensure you understand your obligations and keep accurate records to avoid any potential issues with HMRC.
Tags: UK self-assessment, tax return, cryptocurrency tax, Capital Gains Tax, HMRC compliance
What are the rules for declaring cryptocurrency profits in the UK?
In the UK, you need to declare profits from selling or trading cryptocurrencies on your self-assessment tax return. This includes any gain you make when you sell, spend, or trade your Bitcoin and other cryptocurrencies.
Do I need to declare small profits from cryptocurrency?
Yes, even small profits from cryptocurrency need to be declared on your self-assessment tax return. There is no minimum amount you can ignore. It’s best to keep records of all your transactions.
What happens if I don’t declare my cryptocurrency profits?
If you don’t declare your cryptocurrency profits, you might face penalties from HMRC. Not declaring can lead to additional taxes owed, interest charges, or even legal action depending on the situation.
How do I calculate my profits from cryptocurrency?
To calculate your profits, you subtract the amount you originally spent on buying the cryptocurrency from the amount you got when you sold it. Keep track of your buying and selling prices to make this easier.
Are there any allowances for cryptocurrency profits?
Yes, you are allowed to use the Capital Gains Tax allowance. For the current tax year, you can make some profits tax-free each year, but you’ll need to report any gains above that allowance.
