Crypto investors face an eye-watering 24 per cent capital gains tax charge under the new Labour Party government. HMRC has reportedly been sending “nudge letters” to individuals suspected of failing to properly declare their cryptocurrency profits.
According to HMRC, there are high rates of non-compliance when it comes to reporting crypto gains. Basic-rate taxpayers now face an increased CGT rate of 18 per cent, up from 10 per cent, following changes announced in the October Budget.
Higher and additional rate taxpayers’ rates jumped from 20 to 24 per cent. James Carn, an associate director in Private Client Tax at Evelyn Partners, warns: “The tax treatment of crypto assets can be complex.”
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Suzanne Morsfield, policy advisor at trade association CryptoUK, previously spoke out in the wake of the Autumn Statement and said the prospect of Reeves hiking capital gains tax above 28% will hit the some five million crypto holders in Britain particularly hard.
“There’s a perception that capital gains tax mostly reaches the upper echelons of society… that it’s a way of making the wealthy shoulder more of the burden,” Morsfield told DL News. “That’s not 100% accurate, especially when it comes to crypto.”
Her caution comes after the British tech community warned that a tax hike may drive innovative firms away. The CGT rate for individuals with lower incomes will rise from 10% to 18%. For those in higher income brackets, the CGT rate will increase from 20% to 24%.
The tax applies to profits exceeding £3,000 ($3,896.70) from the sale of assets. The rates are based on both the individual’s income level and the amount of profit realized from asset sales. The rise in capital gains tax rates means that investors will face higher tax liabilities on their profits from asset sales.
This change affects a wide range of assets, including real estate, stocks, bonds, and other investment vehicles.