- The new policy would go into effect next year as part of a wider agenda by the UK government to regulate cryptos.
- There is currently no international crypto reporting standard except the Crypto Asset Reporting Framework set for 2026.
The UK is increasing its oversight concerning cryptocurrencies and matters of taxation, this time adding a separate category for digital assets in the tax forms.
The changes by His Majesty’s Treasury – expected to be included in the tax period 2024-25 in the self-assessment tax forms – require that the amounts concerning crypto assets be identified separately. Following the step, the Treasury is yet to specify the anticipated budget revenues in the category, with the numbers currently at a nominal 10 million British pounds ( $12 million.)
The Chartered Institute of Taxation (CIOT) has welcomed the amendment, announced in the Spring Budget 2023 policy paper, saying it is important to educate the public on their tax obligations related to digital assets.
‘‘Highlighting the need to declare crypto asset transactions in the tax return will help raise awareness of people’s obligations in this area. Crypto assets are chargeable to capital gains tax (CGT) as any other investment asset. Still, concern exists about widely known compliance obligations, particularly amongst those professionally represented,’’ said Gary Ashford, the CIOT Deputy President.
Less than a third of the UK taxpayers understand their CGT reporting obligation: CIOT
The institute maintains that many low-income UK taxpayers have invested in the digital asset class, but less than a third understand their CGT obligation. About half of the taxpayers are reportedly not conversant with the tax guidance, and 84% have not sought the relevant tax advice. CIOT also acknowledged the need for an international reporting standard in crypto pending the Crypto-Asset Reporting Framework set for 2026.
The exchequer’s new taxation policy is part of a wider agenda in the UK to regulate digital assets since the new chair of the Financial Conduct Authority (FCA), Ashley Alder, took office in February. Alder is skeptical about the cryptocurrency space because of the illegal activities in the sector.
In December, he told a bipartisan Treasury select committee sitting that: ‘‘our experience to date of digital asset platforms, whether FTX or others, is that they are deliberately evasive, they are a method by which money laundering happens in size.’’ The events that led to the collapse of FTX have pushed the authority to work on new regulatory rules, including limiting the amount foreign companies can sell digital assets into the country and the advertisement of the asset class.