The U.K. is looking to mandate the declaration of crypto holdings in 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.
Based on a separate document published by HM Revenue and Customs, crypto holders will have to declare their profits on the capital gains form and will be subject to taxation when investments are sold for a profit.
Holding cryptocurrencies will not incur a tax.
Increasing crypto regulation
Beyond bringing cryptocurrencies into the tax net, the U.K. is also looking to pave the road for regulating the crypto industry.
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.
However, what form these rules might take remains unclear. 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 of draft rules for the crypto industry in February and is currently in the process of conducting a public consultation.
Rules for the industry
The new rules cover a variety of things within the crypto industry, including onboarding to a trading platform, operating a blockchain node, executing payment transactions or remittances and mining payments, among others.
Furthermore, the rules also cover exchanges and companies offering crypto-related services in the U.K. Under the rules, both exchanges and firms offering services in the country will have to secure a license from the Financial Conduct Authority (FCA) to operate in the U.K.
Additionally, firms will have minimum capital and liquidity requirements placed on them and will be subject to anti-money laundering and terrorism financing requirements.
The FCA will take the lead in regulating the sector.