UK Crypto Community at Risk as Potential Capital Gains Tax Hike Looms

A potential hike in the UK’s capital gains tax rate could negatively impact Britain’s strong five million crypto community. Policy advisor Suzanne Morsfield from CryptoUK expressed concern that raising capital gains tax above the current 28% could severely impact crypto holders, especially since they cannot use Individual Savings Accounts (ISAs) for tax protection on their digital assets.

Suzanne Morsfield, a policy advisor at the UK trade association CryptoUK, warned that a capital gains tax increase could have severe consequences on Britain’s burgeoning crypto investors. Currently, crypto holders in the UK are taxed similarly to those holding stocks, with rates ranging from 10% to 18% for basic taxpayers and 20% to 24% for higher-income individuals.

The crypto community faces a unique challenge: unlike other assets, cryptocurrencies cannot be housed in Individual Savings Accounts (ISAs), which offer substantial tax benefits. ISAs allow individuals to protect gains on various assets from taxation up to a yearly limit, but this protection does not apply to crypto holdings. Morsfield highlighted that an increase above the current 28% cap could increase the financial strain on crypto investors, who pay taxes without the option to use ISAs as a safeguard.

Morsfield also noted that a tax hike could discourage new investors and stifle innovation in the UK’s digital asset market, especially if crypto is taxed more heavily than traditional financial assets.

The UK lags behind the EU on crypto regulation. The UK Treasury published its final proposals for crypto regulations in October 2023, and the Financial Conduct Authority is working on the finer details of these laws. With more than five million Brits holding digital currencies, Morsfield’s remarks emphasize the potential ramifications of a capital gains tax hike on both individuals and the broader financial ecosystem.