Only slightly more than £4 million has been disclosed through HMRC’s cryptoasset disclosure service, possibly a sign of the lack of knowledge and adherence to regulations regarding cryptoassets.
Capital gains tax (CGT) applies to the majority of cryptocurrency gains, and HMRC believes that many investors in cryptoassets have neglected to report their gains when they are sold or given as gifts:
- People may believe that cryptocurrency transactions are tax-free, particularly if they are just exchanging one kind of cryptocurrency asset for another.
- When cryptoassets are added to one of the specialised Visa cards, which can be used anywhere in the world, it is also simple to dispose of them if they are used to pay for goods or services.
For instance, an investor uses some of their Bitcoin to purchase a new cryptocurrency. The investor switches back to Bitcoin as the value of the new cryptocurrency rises. Since both transactions are disposals, gains over the £3,000 exemption are subject to CGT.
Compliance
More than 100,000 letters have been sent by HMRC asking investors to reveal their cryptoasset tax obligations. However, until recently, it was very simple for investors to evade scrutiny by using foreign cryptoasset service providers, who were not obligated to provide HMRC with any information.
On January 1, 2026, new reporting regulations went into effect. These are applicable when a cryptocurrency investor purchases, sells, transfers, or exchanges cryptocurrency assets; however, the reporting requirements have not yet been signed by a number of host countries. Likewise, using a decentralised exchange might circumvent the new reporting rules.
Cryptoassets also pose a problem for inheritance tax (IHT). The assets form part of a deceased’s estate, but access may not be possible when security involves private keys and passwords.
HMRC’s detailed guidance on the new cryptoasset reporting requirements can be found here. Alternatively, contact our accountants in Barnsley.