The U.K. intends to make it mandatory that crypto holdings are declared on Self Assessment tax return forms.
The move was announced as part of the U.K.’s latest annual budget published on March 15 and is expected to raise an additional £10 million for the government.
U.K. citizens will have to declare their crypto holdings starting next year — the tax year that ends in April 2025. Under the change, crypto assets will have to be “identified separately” on the form.
A separate document from HM Revenue and Customs states that crypto owners will have to declare any capital gains and will be taxed when their investments are made for a profit.
Cryptocurrencies are not subject to tax.
Increased regulation of crypto
The U.K. plans to not only bring cryptocurrency into the tax net but also regulate it.
The country’s Parliament has been discussing legislation around cryptocurrencies and a recent debate on the matter revealed that most members agree on bringing more certainty to the sector by eliminating the gaps in regulation via rules.
But it is still unclear what form these rules will take. Chancellor of the exchequer Jeremy Hunt said at the time that he intends to conduct several “round tables” to find the best path forward.
The Finance Ministry published its first set draft rules for the cryptocurrency industry in February. They are currently conducting a public discussion.
These new rules apply to many aspects of the crypto industry including onboarding to a platform for trading, operating a node blockchain, execution of payment transactions, remittances, and mining payments.
The rules also apply to exchanges and companies that offer crypto-related services in Britain. The rules require that both exchanges and firms providing services in the UK must apply for a license to operate in Britain from the Financial Conduct Authority.
In addition, the firms will have to meet minimum capital requirements and liquidity requirements. They will also be subject to anti money laundering and terrorist financing requirements.
The FCA will be the regulator of the sector.