Memory is a slippery thing. Especially when it comes to various deadlines and important terms.

Unfortunately, HMRC doesn’t seem to show much compassion regarding missed dates. However, even if you forgot about the UK tax deadline, there are a few things that you can do to minimize consequences and potential penalties. And, as the crypto tax filing date has just passed, we decided to list them for you!

Crypto taxes in the UK

As a crypto user or investor, you need to pay attention to two main UK taxes:

  • Capital Gains Tax – applied when you made profits due to the appreciation of the asset’s value. For example, you’ll need to pay it when the price of tokens deposited in the DeFi liquidity pool had increased and you’ve decided to realize your gains.
  • Income Tax – applied when the profit is not related directly to your holdings. For example, you’ll need to pay it when you have received additional tokens through staking.

The rates of these taxes vary and depend on the value of gains or profits – you can learn more on this topic from our guide on UK crypto taxes. What is most important, though, is that both Income and Capital Gains taxes are included in a so-called financial year.

When is the UK tax deadline for 2022?

The financial year in the UK usually lasts from April to April, resulting in the need to report gains and profits in nearly ten months after this period.

Unfortunately, as we mentioned, memory is not the strongest ability of people. The UK tax deadline for 2022 was the 31st of January 2023, and, as the HMRC itself reports, around 600,000 customers have already missed it. That’s not a low number – it represents about 5% of all taxpayers.

What are the crypto tax penalties from HMRC?

HMRC has a fixed rate for penalties for filing a tax return after the 31st of January. The general rules are as follows:

  • If you filed your tax declaration up to three months after the deadline – you’ll receive a fine of £100. Please remember that it also applies when there is no tax to pay – as HMRC requires you to declare real gains, gains that are not subject to tax (e.g., because your capital gains are below the tax-free band, i.e., £12,300), profits, and losses.
  • If you filed your tax declaration over three months after the deadline – you’ll receive additional daily penalties. They amount to £10 per day and are up to a maximum of £900.
  • If you filed your tax declaration over six months after the deadline – the penalty gets higher and is equal to 5% of the tax or a £300 fine. Which of these two you’re more likely to receive? Well, HMRC will apply a greater penalty.
  • If you filed your tax declaration over 12 months after the deadline – the rules from the point above are applied. However, in some cases, you may have to pay even up to 100% of the tax you owe.

If you’re unsure about the amount of the fine, you can use HMRC’s tax penalty calculator.

Also, please remember that the aforementioned penalties apply to the late filing of the tax. If you filled it out but, for whatever reason, forgot or skipped the payment, you’ll likely receive another fine:

  • If you paid over 30 days after the missed deadline – 5% of the tax.
  • If you paid over 6 months after the missed deadline – an additional 5% of the tax.
  • If you paid over 12 months after the missed deadline – another additional 5% of the tax.

I missed the UK crypto tax deadline – what now?

If you are one of the people HMRC labeled “unpunctual,” we are here to help you!

The first thing you need to do is to calculate your tax for the previous fiscal year. To do that, you can use a crypto tax calculator or list all your taxable gains, profits, and losses manually. We strongly recommend checking the crypto tax guides first – so you won’t miss any obligations.

When you know the amount of tax you need to pay, you can go directly to the HMRC’s Government Gateway online service, where you can fill out a Self-Assessment Tax Return and a Capital Gains Tax Summary (please remember to check your unique taxpayer reference beforehand – it’ll make things much smoother). If you need any help on this topic, HMRC prepared a short guide.

Alternatively, you can fill both forms on paper and send them by post. However, as the deadline for the paper tax return was on the 31st of October 2022, you’d receive a higher penalty. Therefore, we encourage you to use an online path.

After you file your tax return, the last step is to pay the tax bill. Again, you can use various forms of payment (online, bank transfer, cheque), but it’s the most “digital” option that would be the most efficient (and relieve you from additional stress). Hence, we encourage you to pay the tax via credit card.

How to avoid UK tax penalties from HMRC?

The good news is that it’s not set in stone that you’ll receive a hefty penalty for the missed deadline. HMRC is open to discussions about the reasons and enables you to appeal a penalty. However, please remember that before reaching out to the tax authorities with any kind of explanation, you must send the tax return first.

If you decide to appeal, you’ll be able to do it in 30 days after receiving the penalty notice. There are two options for doing so:

  • Online appeal – if your fine is equal to £100. Please go to HMRC’s page for more details.
  • Post or phone appeal – if you don’t want to appeal online, or the penalty is not equal to £100.

Obviously, when you appeal, you’ll need to add a “reasonable excuse,” as HMRC calls it. And even if it’s just a tax institution, there are real people working there. Hence, they’ll be likely to accept such explanations as:

  • Unexpected stay in the hospital
  • Serious or life-threatening illness
  • Availability of HMRC online service
  • Fire or flood
  • The death of your partner or another close relative shortly before the deadline

The result of your appeal will be provided to you by email, letter, or phone. Please remember that no matter if you agree with the penalty or not, you’ll need to pay it first (before contacting HMRC). Depending on the result of the appeal, HMRC will simply send your money back or explain the reasons for maintaining the fine. However, no matter the outcome, it’s always good to know your rights and obligations in such situations, so we encourage you to check the HMRC Charter document. Just in case!