UK Budget locks in new crypto reporting regime from January 1
The UK’s latest Budget has put a firm date on a major shift in how crypto activity will be reported to the tax authorities, confirming that new disclosure rules for digital asset users and platforms will begin taking effect from January 1 next year.
Under the changes, individuals trading or investing in crypto will be required to provide personal information to UK‑registered crypto exchanges and other service providers. Those platforms, in turn, will have to share data on customers’ holdings and transactions with HM Revenue & Customs (HMRC) under a new international reporting standard.
The government expects the move to bring in the equivalent of around $417 million in additional tax revenue over the coming years, as crypto activity that previously went undeclared is pulled into the formal tax net.
Part of a global transparency push
The new rules stem from the Organisation for Economic Co‑operation and Development’s (OECD) Cryptoasset Reporting Framework (CARF). This framework is designed to do for crypto what the Common Reporting Standard (CRS) did for traditional bank accounts: give tax authorities a clear line of sight on cross‑border financial activity.
By adopting CARF, the UK is aligning itself with other major economies that are building systems to automatically exchange information on crypto holdings and transactions. For UK‑based users, that means their activity on compliant platforms will increasingly be visible to HMRC, even if the assets are moved across borders or held in different currencies or tokens.
What exactly will be reported?
The Budget documents state that UK‑registered cryptoasset service providers will be obliged to collect and report a range of data points about their customers. While detailed implementation rules are still being finalized, the framework is expected to cover:
– Identifying details of the customer, such as name, address and date of birth
– Tax identification or reference numbers where available
– Information about crypto transactions, including disposals, transfers and possibly some on‑chain movements
– Aggregate values and, in certain cases, balances or positions over a period
According to the Budget, platforms will begin collecting the information for the first reporting period on January 1, 2026. The data gathered for that period is then scheduled to be reported to HMRC in 2027. The obligation for customers to provide their details to platforms, however, starts earlier—from January 1 of next year—so that exchanges and other service providers can build compliant records in advance.
Penalties for non‑compliance
Investors who refuse or fail to provide the required information to crypto platforms run the risk of financial penalties. The Budget confirms that individuals could be hit with fines of up to £300 (around $397) for not supplying the necessary details when requested.
Platforms themselves will also face penalties if they do not comply with their obligations to collect and report customer information. While the policy documents suggest that fines may be issued on a recurring or per‑breach basis, the full penalty structure will only become clear once secondary legislation and HMRC guidance are published.
The clear message is that both sides of the transaction—users and service providers—will be held responsible for ensuring that the data flow to HMRC is complete and accurate.
How this changes the landscape for UK crypto users
For everyday crypto traders and investors, the new regime does not change the basic principle that crypto profits have always been taxable in the UK. Capital gains tax and, in some cases, income tax already apply to cryptoasset activity.
What does change is the likelihood that HMRC will know about those activities even if a taxpayer does not volunteer the information. Historically, many people relied on the relative opacity of crypto platforms, especially those based overseas, to assume that their trades were effectively invisible. Under CARF, that assumption is becoming significantly riskier.
In practice, UK users can expect:
– More frequent requests from exchanges for KYC (know‑your‑customer) information and tax identifiers
– Increased scrutiny of large or frequent movements between platforms and personal wallets
– A higher chance of HMRC contacting individuals where reported activity does not match self‑assessment tax returns
Impact on crypto exchanges and service providers
For UK‑registered exchanges, brokers, custodians and certain DeFi‑adjacent intermediaries, the new rules will mean a substantial compliance uplift. They will need to:
– Update onboarding flows to capture additional tax‑relevant information
– Build or adapt systems capable of tracking customers’ cryptoasset transactions in a structured, reportable format
– Implement robust data security and privacy controls to protect sensitive customer information
– Prepare for audits and inquiries from HMRC around the completeness and accuracy of submitted data
Some smaller platforms may struggle with the technical and financial burden of compliance and could either exit the UK market or restrict the services they offer to UK residents. Larger, well‑capitalized players are more likely to treat the new rules as a cost of doing business in a maturing regulatory environment.
Lending, staking and other complex products
One of the thorniest issues for both taxpayers and platforms is how newer crypto products—such as lending, staking, yield farming and liquidity provision—are treated for tax and reporting purposes.
CARF is designed to capture a broad range of “cryptoasset” transactions, not just spot buy‑and‑sell trades. This means that:
– Interest or rewards from lending and staking schemes may fall within reportable income
– Movements between wallets linked to DeFi protocols could, in some cases, trigger reportable events
– Wrapped assets or tokenized positions (such as staked ETH derivatives) may need to be tracked as distinct assets with their own acquisition and disposal values
HMRC has already issued guidance in several of these areas but is expected to refine its position further as CARF is implemented. Investors relying on high‑yield or complex strategies will need to pay close attention to how their activities are categorized and reported.
Record‑keeping becomes non‑negotiable
With automated reporting on the horizon, accurate personal record‑keeping becomes more important than ever. Relying on exchange transaction histories alone is risky, especially for users who:
– Trade across multiple exchanges
– Bridge assets between networks
– Use hardware or software wallets
– Interact with decentralized protocols that do not provide formal statements
To minimize disputes or unexpected tax bills, UK crypto users would be wise to:
– Download and securely store periodic transaction exports from each platform they use
– Keep a log of transfers to and from personal wallets, including the purpose and counterparties where relevant
– Use portfolio tracking or tax calculation tools to reconcile activity across platforms and chains
If HMRC’s view of a taxpayer’s activity, based on CARF data, diverges from what the taxpayer has reported, the burden will often fall on the individual to explain the difference.
Privacy and data‑security concerns
The concentration of sensitive financial and personal data in the hands of exchanges and tax authorities inevitably raises privacy questions. Critics worry about:
– The risk of data breaches at poorly secured platforms
– The potential for broad cross‑border information sharing under international agreements
– The use of transaction data for purposes beyond tax collection
The UK government argues that the benefits—closing tax gaps, deterring evasion and bringing clarity to a previously opaque sector—justify the move, and that standard data‑protection rules will continue to apply. Nonetheless, privacy‑conscious crypto users may decide to adjust how and where they trade, or to segregate activities more carefully between KYC and non‑KYC environments, recognizing that such strategies will themselves come under closer scrutiny.
What UK crypto users should start doing now
Even though the first formal reporting to HMRC under CARF will not take place until 2027, the preparations for that process begin much earlier. Individuals active in crypto should:
– Ensure their details on exchanges (name, address, date of birth) are correct and consistent
– Obtain and keep to hand their UK tax reference numbers
– Review past trading and investment activity to identify any undeclared gains or income
– Consider seeking professional tax advice if they have significant or complex crypto portfolios
Proactive compliance can significantly reduce the risk of penalties, back‑tax assessments and stressful inquiries down the line.
A step toward mainstream financial treatment
By embedding crypto into the same kind of international reporting framework that governs traditional financial accounts, the UK is signaling that digital assets are no longer a marginal or exceptional category. They are being folded into the standard tax and regulatory architecture of the financial system.
For some in the crypto community, this will be seen as yet another erosion of the sector’s original ethos of anonymity and autonomy. For policymakers, it represents a necessary normalization: if crypto is to coexist alongside traditional assets at scale, it must be subject to comparable levels of transparency and oversight.
What is clear is that from January 1, the UK’s crypto investors and service providers enter a transition period that will culminate in HMRC having far greater visibility of digital asset activity. Those who adapt early—to clearer record‑keeping, fuller disclosure and more structured compliance—are likely to find that transition far less painful than those who wait until the first official information requests land.