CRYPTO currency investors are being urged to check they are paying the correct level of tax on their gains.
Leading taxation expert, Mark Leadley, of accountancy firm JF Hornby & Co, issued the plea as it emerged HMRC has been targeting individuals it believes may be dodging their liabilities with ‘nudge letters’.
He says many crypto investors are unaware of their tax obligations due to uncertainty over tax rules and a limited understanding of the nature of crypto assets.
Mark added: “Many investors might not realise that gains from crypto assets are liable for income tax or Capital Gains Tax (CGT), just like any other asset, depending on how they are held.
“If you receive a ‘nudge letter’ from HMRC, it’s essential to take it seriously. Even those who don’t get a letter should review their crypto activity and submit a tax return or use the real-time Capital Gains Tax service if needed.
“Tax may still be due even if the investor doesn’t believe their investments have been profitable. Selling, lending, or ‘staking’ crypto assets – or even just transferring them between crypto platforms or portfolios – will generally trigger a disposal in the relevant tax year.”
According to the Chartered Institute of Taxation, a chargeable disposal occurs when an individual:
- Sells crypto assets for fiat currency (ie sterling or USD)
- Exchanges one crypto asset for another.
- Uses crypto assets to buy goods or services.
- Gives away crypto assets to someone other than spouse or civil partner (in this instance, the individual is deemed to receive the value of the asset even if they do not actually receive anything).
The cryptocurrency market has seen remarkable growth in recent years, with its total market value exceeding £2 trillion in 2024.
This expansion is largely driven by increased adoption from institutions and the rise of decentralised finance (DeFi) platforms.
Bitcoin remains the dominant cryptocurrency, but Ethereum and various altcoins are also playing a significant role, with Ethereum alone facilitating over £1 trillion in transactions.
The growing global acceptance of digital assets and clearer regulations are contributing to the continued upward trajectory of the crypto market.
Mark said: “This is a complex area to navigate, and we encourage all holders of crypto currencies to consider their trading patterns over the last 12 months in the context of the information above and take action where necessary.
“We can, of course, help with all tax-related matters and are here to support our existing and new clients in this area.”
