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The UK government is looking to mandate the declaration of crypto holding in Self Assessment tax return forms, with the aim to regulate the industry and fight money laundering.
The initiative was announced as part of the UK’s annual budget published on March 15 and is expected to raise an additional EUR 10 million for the government. Now citizens will have to disclose their crypto holdings starting next year – the tax year that ends in April 2025. Under the change, crypto holding will need to be identified separately on the tax form.
Based on a separate document published by HM Revenue and Customs, citizens holding crypto assets will have to declare their profits on the capital gains form and will be liable to pay tax when the investments are sold for a profit. However, holding cryptocurrencies will not incur a tax.
Beyond bridging cryptocurrencies into the tax net, the government is also looking to take steps to regulate the crypto industry. Parliament has been discussing legislation surrounding crypto for the past years, and a recent debate on the matter revealed that the majority of members agree on bridging more transparency in the crypto market, by eliminating the loopholes in the regulations.
However, the Finance Ministry published the first draft of the upcoming crypto legislation in February and is currently in the process of counting a public consultation.
The new laws and standards will cover several things within the crypto industry, including onboarding to a trading platform, operating a blockchain node, executing payment transactions or remittances, and mining payments. Among them, legislation will also cover exchanges and companies providing crypto-related services in the UK. Under the new laws, all the exchanges operating in the country will have to get a license from the Financial Conduct Authority (FCA).
Additionally, crypto exchanges and platforms will need to comply with capital and liquidity requirements placed on them and will be subject to anti-money laundering and terrorism financing requirements.