HMRC only contacts 0.4% of UK’s crypto investors about tax bills

UK Financial Conduct Authority estimates last year 2.3 million Britons invested in crypto

Piece of paper bearing the logo and name of HM Revenue and Customs                                 
HMRC sent fewer than 8,400 letters to UK crypto investors about possible capital gains tax bills they may face – Photo: Alamy
                                

The UK tax authority has written to less than 1% of UK crypto investors in 2021 regarding the possibility that they may owe thousands of pounds in capital gains tax.

Her Majesty's Revenue and Customs (HMRC), which is responsible for the collection of taxes, sent just 8,329 letters – representing just 0.4% of crypto investors – that they may have tax due because of their crypto investments.

The matter was highlighted by a Freedom of Information request from British multinational wealth management company Quilter as reported by The Daily Telegraph.

According to the UK’s Financial Conduct Authority (FCA), there were 2.3 million British crypto investors in 2021.

‘Educational’ warning letters

HMRC said it had sent out what its described as nudge and “educational” letters to warn crypto investors that they may owe tax due to profiting from cryptos.      

Shaun Moore, life and investment specialist at Quilter, said the government and HMRC had not done enough to properly raise awareness of crypto investing and taxes.

Moore told The Daily Telegraph: “Considering the significant interest in crypto assets it’s surprising to see that only 8,329 people have been sent a letter asking them to review how much capital gains tax they might owe. Most people who do not pay the necessary tax on their gains are likely to be ignorant of what is required.”

More letters should have been sent

Most crypto investors hold less than £1,000 ($1,306) in cryptos and therefore are unlikely to have breached the £12,300 ($16,072) capital gains allowance.

Still, Chris Etherington, a private client partner in RSM, a multinational network of accounting firms, has estimated that hundreds of thousands of crypto investors may be going unnoticed by HMRC.

Etherington told The Daily Telegraph: “The number of people contacted by HMRC should be substantially higher than 8,329. Much more needs to be done to educate cryptocurrency investors about how they could be taxed in the future.”

Only sent to certain investors

HMRC explained that letters had only been sent out to specific investors and that crypto investors have been urged to review their crypto transactions to make sure that all taxes were declared correctly.

“We want to help people get their tax affairs right – and nudge letters are one of the ways we do this. Awareness raising letters are not sent to all taxpayers, but to those who we have reason to believe would most benefit from additional information,” said HMRC.

“Customers that have invested in crypto assets can find out more about the circumstances when tax may be due by going to GOV.UK and searching ‘tax when you sell crypto assets’.”

Further reading

The material provided on this website is for information purposes only and should not be regarded as investment research or investment advice. Any opinion that may be provided on this page is a subjective point of view of the author and does not constitute a recommendation by Currency Com or its partners. We do not make any endorsements or warranty on the accuracy or completeness of the information that is provided on this page. By relying on the information on this page, you acknowledge that you are acting knowingly and independently and that you accept all the risks involved.
iPhone Image
Trade the world’s top tokenised stocks, indices, commodities and currencies with the help of crypto or fiat
iMac Image
Trade the world’s top tokenised stocks, indices, commodities and currencies with the help of crypto or fiat
iMac Image