UK has reported a staggering 40% increase in crypto ownership over the past year, according to the latest Financial Conduct Authority (FCA) survey.
In fact 12% of UK adults—equivalent to around 7 million people—now own crypto-assets, up from 10% (5 million people) in 2022.
“Awareness of crypto also rose from 91% to 93%,” FCA said on 26 November 2024.
This surge in adoption has caught the attention of HM Revenue & Customs (HMRC), and maybe not in the best way.
The HMRC is ramping up its compliance efforts to ensure crypto investors meet tax obligations.
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Is UK’s Crypto Landscape Undergoing A Seismic Shift?
The FCA’s survey highlights not only the growing number of crypto owners but also an increase in the value of holdings.
The average value of crypto-assets per individual rose from £1,595 in August 2022 to £1,842 in 2023.
Additionally, the percentage of investors holding between £5,000 and £10,000 worth of crypto-assets jumped from 6% to 19%.
This rapid growth underscores the mainstream acceptance of cryptocurrencies as an investment vehicle.
However, it also brings challenges, particularly around tax compliance, as many investors remain unclear about their obligations.
Tax Confusion Among Crypto Investors
Despite the growing popularity of cryptocurrencies, there is significant confusion about how crypto gains are taxed in the UK.
Crypto investors are specifically unhappy with UK’s approach towards crypto. People have taken to X to share their disappointment.
I came to Dubai because the UK Government forced me to with dumb crypto regulation
I imported my cars from England 🏴
I sold my house in England
I love England
I paid £780,000 in tax last year
Their stupidity is costing them the highest tax payers. pic.twitter.com/eCC1E1p8DT
— That Martini Guy ₿ (@MartiniGuyYT) November 18, 2024
HMRC treats crypto as assets rather than currency or money. This means that profits or losses from buying and selling crypto are generally subject to Capital Gains Tax (CGT). In rare cases where crypto trading is deemed a business activity, Income Tax applies instead.
For individuals, tax rates range from 10% for basic-rate taxpayers to 20% for higher-rate taxpayers.
In fact, income derived from activities like mining or staking may also be subject to Income Tax at rates ranging from 20% to 45%.
Explore: UK Crypto Tax Could Jump to 39% As Italy Reveals 42% Crypto CGT
HMRC Intensifies Efforts To Address Non-Compliance
In August 2023, HMRC launched a campaign targeting individuals suspected of failing to declare crypto gains.
Furthermore, in 2022, a service was introduced to allow individuals to voluntarily disclose unpaid taxes on crypto-assets.
HMRC also has access to transaction data from UK-based exchanges and will soon benefit from international data-sharing under the OECD’s Crypto-Asset Reporting Framework (CARF), set to take effect by May 2027.
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