New research from HMRC on crypto assets highlights lack of awareness from investors of the tax rules

New research from HMRC published today on the usage of cryptocurrency shows that of those investing in the space, the majority had little or no understanding of how the Capital Gains Tax (‘CGT’) rules operated. The majority of individuals involved in cryptoassets do so in order to obtain an investment return but the lack of awareness of how such returns may be taxed is worrying. According to the research, 34% stated they had a good understanding of how the CGT rules operated but 37% knew little or nothing and 22% were not familiar with CGT at all.

With significant increases in the numbers of individuals investing into cryptoassets, the lack of understanding and awareness of how they are taxed will be a concern for the Treasury and HMRC. As the research shows, 76% of cryptoasset owners are under the age of 45 and the explosion of interest in this space could lead to many young people’s first real interactions with HMRC being an investigation into their affairs for unpaid tax in the future. HMRC are working to improve their guidance but as it stands, the lack of any specific legislation for cryptoassets makes the tax rules impenetrable for many. Whereas financial investors in stocks and shares can benefit from ISAs, no such safe harbour exists for cryptoasset investors. If the Chancellor wants to truly make the UK a global hub for cryptoassets technology then the tax rules in this space need to be simplified.