Navigating the UK's evolving cryptoasset tax and reporting landscape

As digital currencies become more embedded in global financial systems, the UK is sharpening its focus on how cryptoassets are regulated and taxed. For both individuals and businesses, the opportunities that crypto presents are significant—but so are the responsibilities, particularly when it comes to compliance with HM Revenue & Customs (HMRC) requirements.

Recent developments at both domestic and international levels are redefining how crypto transactions are reported and taxed. Understanding these changes is essential for staying ahead of your obligations and avoiding costly penalties.

Global transparency: the introduction of the Cryptoasset Reporting Framework (CARF)

In a move to align with global efforts to combat tax evasion in digital finance, the UK Government confirmed in its Autumn Budget 2024 that it will adopt the CARF. Developed by the OECD, this framework is designed to improve transparency by enabling the automatic exchange of cryptoasset information between countries.

To support the rollout of CARF in the UK, the Institute of Chartered Accountants in England and Wales (ICAEW) announced a collaborative partnership in February 2025 with six leading organisations. The goal is to help cryptoasset users, service providers, and HMRC navigate the complex technical and regulatory requirements that CARF introduces.

HMRC Guidance: preparing for Compliance in 2026

The implementation of CARF in the UK took a formal step forward on 14 May 2025, when HMRC issued guidance outlining the new reporting obligations. These requirements will apply from 1 January 2026, and the first reports will be due by 31 May 2027.

At the centre of this new regime are Reporting Cryptoasset Service Providers (RCASPs) —organisations that either:

• facilitate cryptoasset transactions on behalf of users; or
• offer platforms where such transactions can occur.

To fall within the scope of CARF, a cryptoasset must be:

• used for payment or investment; and
• not already reportable under the Common Reporting Standard (CRS).

These definitions mark a significant step toward regulatory consistency and signal HMRC’s intent to align crypto reporting with established financial reporting norms.

Who must report?  Understanding UK-based RCASPs

Whether a service provider is considered “UK-based” depends on several criteria. A business falls under this classification if any of the criteria below applies:

• tax resident in the UK;
• incorporated in the UK;
• centrally managed from the UK;
• operating through a permanent place of business or branch in the UK.

When a business satisfies criteria in multiple jurisdictions that have implemented CARF, reporting is only required in one country, based on a defined hierarchy:

Taxing crypto in the UK: Capital gains or income?

Contrary to popular belief, there is no specific “cryptocurrency tax” in the UK. Instead, HMRC assesses each crypto transaction to determine whether it falls under Capital Gains Tax (CGT) or Income Tax.

CGT

Most individual investors will encounter CGT when disposing of cryptoassets. HMRC defines a “disposal” as:

• selling crypto for fiat currency (that is, “normal” money that isn’t crypto);
• swapping one cryptocurrency for another;
• using crypto to purchase goods or services;
• gifting crypto;
• participating in certain decentralised finance (DeFi) activities where ownership is relinquished.

Income tax

Some crypto transactions are taxed as income, particularly when the asset is earned rather than invested. This includes:

• receiving a salary or bonus paid in crypto;
• being paid for a service in crypto;
• receiving staking or mining rewards;
• certain airdrops and incentive schemes.

New reporting obligations and penalties from 2026

Beginning in January 2026, RCASPs in the UK must begin collecting customer information for reporting under CARF. This includes:

• full name and residential address;
• country of tax residence;
• wallet addresses;
• transaction details, including disposals, proceeds, and market values.

The first reports will cover the 2026 calendar year and must be submitted to HMRC by 31 May 2027. Failure to report, or submission of incomplete or inaccurate reports, may result in penalties of up to £300 per user, with higher fines for repeated or deliberate non-compliance.

In parallel, HMRC has increased its compliance efforts and now includes a specific cryptoassets section in the Self-Assessment tax return. From 2026, crypto information exchanged under CARF will further enable HMRC to identify discrepancies and undeclared gains.

Managing losses and record-keeping obligations

Crypto losses can be offset against capital gains to reduce your tax bill, subject to being properly reported.

Maintaining comprehensive records is not optional. HMRC expects the following to be retained:

• transaction dates;
• type and quantity of cryptoassets;
• GBP values at the time of each transaction;
• associated wallet addresses;
• related bank statements.

Good record-keeping not only supports accurate reporting but is critical in the event of an HMRC investigation or audit.

Navigating compliance in a new era of crypto regulation

The legal and tax treatment of cryptoassets is no longer a grey area—it is becoming increasingly defined, regulated, and enforceable. As HMRC prepares to implement CARF and intensifies its compliance strategy, crypto investors and service providers must act now to ensure full adherence to evolving regulations.

Whether you are an individual investor, a start-up operating in DeFi, or a cryptoasset platform, it is essential to:

• classify transactions correctly for tax purposes;
• maintain precise and up-to-date records;
• understand your reporting responsibilities under CARF;
• seek professional advice when needed.