top of page
  • Writer's picturePTA

HMRC Letters About Cryptocurrency and Capital Gains Tax

You may be wondering why the UK Revenue and Customs (HMRC) is writing to you about cryptocurrency and capital gains tax. As cryptocurrencies become more mainstream, HMRC has issued speculation letters to taxpayers warning of the potential impact of capital gains tax on the disposal of cryptocurrencies.

This letter gives examples of when to proceed: examples can be found here. HMRC's "one-to-many" campaign letter conveys standard information to multiple taxpayers at the same time.

The purpose is to educate a wide range of stakeholders on the subject, but letters can also be used as a reminder for taxpayers to disclose information.

HMRC Letters About Cryptocurrency and Capital Gains Tax

What Does This Letter Say?

The letter pointed out that in three main situations, taxable profits may arise.

Cryptocurrency transactions-for example, selling bitcoins at a higher price than you purchased.

Exchange one cryptocurrency for another cryptocurrency-for example, use Bitcoin to buy Ethereum.

Use cryptocurrency-for example, use Bitcoin to buy pizza. The above three are all examples of cryptocurrency disposal. The first is traditional disposal. HMRC specifically hopes to raise awareness of the second and third situations. In both cases, Bitcoin is sold at the time of the transaction, and in return, Ethereum or pizza is considered received (at least in this example). The normal capital gains rules apply to every instance. The extra step in the second example is not only the disposal of Bitcoin but also the purchase of Ethereum.

How Does HMRC Know Which Taxpayer to Contact?

HMRC has received information from the cryptocurrency exchange to determine which taxpayer to write to. However, the movement is by no means a kind of "control", the letter is mainly to educate people about the potential capital gains tax impact of disposing of cryptocurrency.

Capital Gains Tax for Cryptocurrency

Do I Have to Pay Capital Gains Tax for Cryptocurrency?

Even if you receive a letter, you do not have to pay capital gains tax, but you should consider whether you need to report your income. For safety reasons, the annual allowance for capital gains is £12,300. If your net profit (ie total profit minus total loss) from all capital gains (including cryptocurrency) in the tax year is less than this amount, there is no need to pay taxes and register for self-assessment. . ..

Even if you have performed a self-assessment and your income exceeds £49,200, but your profit is less than your annual tax allowance, you still need to report your profit.

What is the Punishment for Making a Mistake?

After receiving the letter, HMRC has notified that if the reporting requirements are not met, timely disclosure penalties may not apply. However, when deciding whether to impose a penalty and its severity, the fact that you received the letter will be considered.

How can a Pro Tax Accountant Help You?

If you have questions about taxes in any area, Or have received a letter from HMRC regarding cryptocurrencies, or need assistance in preparing a business account and submitting a self-assessment to HMRC, please contact PTA at 020857188 26.


Recent Posts

See All


bottom of page