With the Autumn Budget coming up on 30th October, rumours are circulating regarding what might change for taxpayers, but what does that mean for crypto owners?
An increase to capital gains tax?
In their manifesto Labour promised not to raise income taxes, so we can reasonably expect the Government will be targeting other taxes in order to help raise funds to cover the so-called £20bn ‘black hole’.
Capital gains tax is an obvious choice for the Chancellor, as it is widely viewed that this would target the wealthy. Broadly speaking CGT is paid on the profits on disposal of assets which can include for example shares, second properties, and crypto assets.
No one is certain how much the increase might be. At the moment, CGT on crypto assets is 20%, unless you have any basic rate tax band left in which case gains may be taxed at 10%. There are rumours that 20% could be increased to be in line with dividend rates i.e. to approximately 39%, or even as high as the top end of income tax rates at 45%, though we think that would be unlikely. It does seem fairly likely however that the rate will increase from 20%.
Capital gains tax and crypto assets
An important point to remember is that a capital disposal occurs on any taxable event for crypto, which includes when crypto assets are exchanged – it is not just when owners liquidate their assets and receive fiat currency. Therefore, there are still crypto owners who may not realise they have an ongoing tax obligation, and we discuss common misconceptions about tax on crypto in a previous article.
The annual exempt allowance for capital gains is just £3,000 in the 2024/25 tax year, so if crypto transactions lead to gains above this amount CGT will be payable. It is also possible that the Government will continue the trend of slashing the annual exempt amount in 2025/26, which would mean even more crypto owners would begin to owe tax on their activity.
When will CGT increase?
If CGT is increased at the autumn budget it is possible that the increase will be effective immediately i.e. from 30 October 2024, as this would prevent individuals from having time to dispose of their assets at a lower rate.
However it may be that any changes announced will only come into effect from 6 April 2025, in which case the Government may be hoping that the announcement would spur individuals into action to dispose of assets prior to April, which in turn will lead to increased tax revenue in the short term albeit at the current rates.
As a crypto owner what should I do?
It’s important to keep up to date with the changing rules and rates. Given the existing complexity of tax on crypto (what is or isn’t taxable, what might be charged to income tax instead of CGT etc) it’s recommended to seek professional tax advice before doing anything drastic.
Our experts at Menzies are on hand to help, whether you need support making a disclosure of any crypto activity to HMRC or whether you need tax advice on your individual position.
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