Britain’s crypto investors are entering a far more transparent era, as tax authorities begin pulling back the curtain on digital asset trading.
Buying, selling, or even gifting cryptocurrency in the UK is no longer something that can sit quietly outside the tax system, with exchanges now required to pass detailed user data directly to HM Revenue & Customs.
Crypto Trading Loses Its Privacy Shield
From 1 January, UK-based users of cryptocurrency platforms must share verified account details or risk penalties.
The change allows HMRC to automatically collect information from exchanges, which function much like banks for digital assets, covering transactions, balances, and gains.
The aim is straightforward.
Ensure tax is paid on crypto profits, particularly capital gains that have often gone unreported.
HMRC believes there are thousands of crypto owners with unpaid tax bills and estimates the new reporting rules could bring in at least £300m over the next five years.
Why Tax Authorities Are Closing In Now
Cryptocurrency prices have swung sharply over the past year.
Bitcoin, widely seen as a bellwether for the sector, climbed from about $93,500 (£69,500) at the start of 2025 to nearly $124,500, before dropping below $90,000 by year-end.
Those price moves created clear taxable events for investors who bought low and sold high.
Authorities have long struggled to track such gains.
Dawn Register, a tax dispute resolution partner at BDO, says HMRC has been worried for some time.
“HMRC has been concerned for some time about high levels of non-compliance among crypto investors.”
She adds that the new rules make it far harder for wealthy investors to keep gains out of sight, giving HMRC far richer data on who is trading and how much they are making.
What Exchanges Must Report To HMRC
Crypto platforms serving UK users are now required to collect and submit comprehensive personal and transaction data.
This includes names, addresses, dates of birth, National Insurance numbers, tax residency, asset types, transaction values, and the nature of each activity, from trading and staking to mining or gifting.
Under the Cryptoasset Reporting Framework, known as CARF, Reporting Crypto-Asset Service Providers will gather data throughout 2026 and submit full-year reports to HMRC by 31 May 2027.
Exchanges that fail to provide accurate and up-to-date records can face fines.
CARF Brings Global Data Sharing Into Play
The UK is among the first 48 countries to implement CARF, an OECD-backed system designed to standardise crypto tax reporting worldwide.
By 2027, HMRC will begin automatically sharing crypto tax data with other participating jurisdictions, including EU member states, Brazil, South Africa, the Cayman Islands, and the Channel Islands.
Around 75 countries have committed to the framework, with the United States expected to adopt the rules in 2028 and start data exchanges in 2029.
Andrew Park, a tax specialist at Price Bailey, warns that the sense of privacy once linked to crypto is fading fast.
He says investors should expect their transaction data to be visible to tax authorities across borders.
Who Pays Tax And When It Applies
The framework does not create new taxes, but it tightens enforcement.
HMRC can now match exchange data against individual tax returns.
Investors with gains above £3,000 may face Capital Gains Tax of 10% to 20%, or Income Tax if trading appears frequent or business-like.
Tax can also arise when crypto is used to buy goods, swapped for other tokens, or given away, with the main exemption being transfers between spouses or civil partners.
Each transaction is assessed on its own merits.
Ms Register warns that anyone who made crypto gains in the 2024–25 financial year may need to file a tax return by 31 January using a new section in the self-assessment form.
“HMRC is also looking to encourage voluntary disclosure where people have unpaid tax in earlier years and want to correct their affairs. HMRC is running a disclosure facility where taxpayers can come clean on undeclared gains and unpaid tax prior to April 2024.”
Enforcement Already Gathering Pace
HMRC’s focus on crypto is not theoretical.
During the 2024–25 tax year, the authority sent 65,000 letters to people suspected of failing to report crypto gains, up from 27,700 the year before.
The jump reflects improved monitoring and the growing availability of transaction data.
Industry estimates suggest 6 to 7 million people in the UK, roughly 10% to 12% of adults, now own some form of cryptocurrency.
Many of them are being brought into tax reporting rules that already apply to shares, property, and bank accounts.
Regulators Push Beyond Tax Compliance
Tax reporting is only one part of the clampdown.
The Financial Conduct Authority is running a public consultation until 12 February on wider crypto regulation.
Proposals include tougher standards for exchanges, new duties to ensure brokers act responsibly, and rules governing crypto lending and borrowing.
Speaking last month, the FCA’s executive director for payments and digital finance David Geale said regulation is inevitable.
“Our goal is to have a regime that protects consumers, supports innovation and promotes trust. We welcome feedback to help us finalise these rules.”
For UK crypto users, it is now clear that digital assets are no longer operating in the margins.
With detailed reporting, international data sharing, and rising enforcement, crypto trading is being folded firmly into the mainstream financial and tax system.
Catherine
Kikyo