Caution: Tax on gifting Cryptocurrency
Currently, crypto assets such as: Bitcoin, Ethereum and Solana are increasingly being used for investments, transactions, and various other means. One topic that is often overlooked is the gifting of cryptocurrency.
On 19 June 2024, Trading View stated that Bitcoin’s market cap is currently at $2.313 trillion. Taking this into account, on 9 January 2024 His Majesty’s Revenue and Customs (HMRC) published ‘a tax reminder for cryptoasset users’ informing crypto-users when to submit a tax return to HMRC.
HMRC stated:
“Tax may be due when a person… gifting cryptoassets to another person… donating cryptoassets to charity.”
This is a stark reminder to HMRC’s guidance published in November 2023, reminding crypto users on the taxation of crypto assets stating:
“You must pay the full amount you owe within 30 days of making your disclosure. If you do not, HMRC will take steps to recover the money.”
You should be aware that in HMRC’s view, cryptocurrency is classified as an asset, therefore a disposal could be potentially taxable, even when gifted. It is important that you understand and comply with your tax obligations to avoid paying any penalties. A previous blog of mine: ‘Cryptocurrency: HMRC on high alert for outstanding Tax’ provides further information in relation to crypto-related tax obligations.
How will gifting crypto impact you?
Gifting cryptocurrency to your children or anyone other than your spouse or civil partner, may result in you generating a capital gain on their disposal, potentially making you liable to Capital Gains Tax (CGT). What’s more in the context of Inheritance Tax, your estate could face IHT implications, should you die within seven years of the disposal.
A recent Yahoo! News article by James Rodger published on 30 April 2024 stated:
“HMRC is actively collecting data from various cryptocurrency exchanges and platforms to identify potential discrepancies in past transactions and tax evasions.”
Therefore, taxpayers must keep separate records for each token, including:
- The type of tokens;
- the date you received them;
- the number of tokens you received;
- the number of tokens you have in total;
- the value in pound sterling, bank statements; and
- the date you disposed of the tokens.
Whilst it may seem daunting for a crypto user, it need not be, provided expert advice is taken at the earliest possible opportunity, with tax compliance and separate token records put in place and regularly reviewed.
How can Ellis Jones help?
The taxation of crypto assets is complex, and taxpayers should seek advice prior to filing a tax return if they are uncertain about their tax obligations.
If you are unsure or need assistance with crypto asset related queries, please visit our crypto specialist webpage. You can contact us on 01202 525 333 or email Richard.smith@ellisjones.co.uk. Alternatively, you can also email our specialist Cryptocurrency team by emailing cryptocurrency@ellisjones.co.uk.
How can we help?
When you submit this form an email will be sent to the relevant department who will contact you within 48 hours. If you require urgent advice please call 01202 525333.
