UK Tax Deadline Could Affect You, Here’s Why

One of America’s most famous and enduring idioms came from the Founding Father, Benjamin Franklin. Reflecting on the constitution of his new country, he expressed hope that it would be durable. “But, in this world,” he said, “nothing is certain except death and taxes.” Unfortunately, he’s still right.

However, we’re guessing that Franklin probably hasn’t heard of bear markets.

Since the explosion of crypto over the last fourteen or so years, taxes have become a practical necessity. It is not advisable to hide your taxable crypto income from the state. In fact, tax evasion is highly illegal. (However, tax avoidanceWhich includes legal means of reducing your tax bill, right.)

The UK government requires that you file a self-assessment tax return online with Her Majesty’s Revenue and Customs (HMRC) by 31 January 2023. This is the date every year for self-employed income earners or capital earners. profit. (Capital gains are the name given to assets that have increased in value. In tax terms, this increase in value is usually taxed when the asset is sold. This is certainly the case with UK tax. )

Am I eligible to pay UK tax?

Anyone who resides in the UK and holds crypto assets must, by law, pay tax on those assets. Your cryptocurrency will most likely be subject to capital gains tax, which means you will have to pay taxes on the difference between its cost and the amount you sold it for.

“Many investors do not know that crypto-to-crypto trades are taxable,” says Miles Brooks, Director of Tax Strategy coinledger.io, one of the leading crypto tax platforms. Miles also holds a master’s degree in taxes and is a Certified Public Accountant. “When you trade your crypto for another cryptocurrency, you will have a capital gain or loss, depending on whether the price of the crypto you are trading has changed since you originally acquired it. !”

Making purchases with crypto is also a taxable event. For example, let’s say you buy 15 Fifth note of musical scale at $500. If you later decide to exchange your 15 SOLs (which are now worth $600) for a new television, the $100 increase in the value of the SOL is eligible for capital gains tax.

You also need to declare when you are paid your salary or wages in crypto, just like you would with fiat.

Despite the name ‘cryptocurrency’, the UK tax authorities do not consider crypto assets to be money or currency. HMRC treats crypto as tangible property like shares and will be taxed in the same way. Crypto investors who have earned more than £1,000 in crypto income or more than £12,300 in crypto capital gains must submit a self-assessment tax return to HMRC.

2022 was a bad year for crypto owners, to put it mildly. so what if your crypto lost value instead of receiving it? “You can use them to lower your tax bill,” says Miles. “Capital loss can offset your capital gain for the year. If you have a net loss, you can carry it forward to future tax years.

from January 1stUK has also introduced tax exemption foreign investors Buying crypto through local investment managers.

However, there are no taxes just for holding your crypto!

What pitfalls should you be aware of?

Cryptocurrencies and other digital assets are still a relatively new asset class. But the issuer of these assets may not take into account your tax liability, HMRC certainly does. crypto (and DeFi, in particular) is still relatively complicated. Most protocols are not yet putting tax simplicity at the top of their agenda.

This is something you should keep in mind throughout the year. “because DeFi Protocols do not provide users with tax forms, tax reporting can be problematic,” says Miles. Investors who have interacted with multiple DeFi protocols often have trouble tracking their gains, losses, and income.

If you are paying tax on crypto assets for the first time, give yourself some time to complete your self-assessment. If you are using multiple wallets and exchanges, this may be more time consuming than you think. “It is important to keep careful records of your crypto transactions, especially in the case of wallet-to-wallet transfers,” Miles told BeInCrypto.

“If you have moved your crypto between different wallets or exchanges, you will need to keep records on your original cost basis to determine your net gain or loss. You should start as soon as possible. If If you have trouble compiling a detailed record of your transactions, you should use cryptographic software or consult a tax professional.”

Don’t Try and Hide Your Crypto

In recent years, the UK government has become increasingly sophisticated with regards to crypto. At the start of the year, the UK took further steps to professionalise its approach to crypto crime by setting up a special unit, However, unless you are defrauding millions in unpaid taxes or are involved in serious money laundering, you will not be their focus.

If crypto experts work elsewhere in government, can HMRC still track your crypto assets? “The answer is yes,” Miles continues. “HRMC has a data-sharing program with major exchanges operating in the UK. Furthermore, transactions on the blockchain such as Bitcoin And Ethereum is publicly visible and permanent. Tax agencies around the world track transactions by locating ‘anonymous wallets’ of known investors.

If you’ve entered your personal details with a major exchange, you may also get a letter in the post encouraging you to declare your crypto earnings.

Non-disclosure of profit can result in capital gains tax of 20% and a penalty of up to 200% of the interest and tax due. Tax evaders can also face criminal charges and jail time.

disclaimer

All information contained on our website is published in good faith and for general information purposes only. Any action the reader takes upon the information found on our website is strictly at their own risk.

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