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
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’.”
