UK budget confirms new crypto reporting rules from January 1

The UK government has confirmed in its 2025 budget that it will implement new rules from January 1 next year that will force cryptocurrency traders to report personal data to trading platforms.

The Cryptoasset Reporting Framework (CAFR), which was first introduced as part of an international agreement with the OECD, requires providers of cryptoasset services to provide HM Revenue & Customs with information about their customers, including cryptocurrency transactions and tax reference numbers.

This year’s budget published on Wednesday confirms that “information for initial reports to HMRC will be collected from 1 January 2026 and reported to HMRC in 2027.”

Investors who fail to provide required data to exchanges may be fined up to £300 ($397), while exchanges will be fined up to £300 per unreported customer.

HMRC will then use the information provided to audit completed tax returns, identifying individuals who have not correctly reported their cryptocurrency winnings.

In doing so, the tax office predicts it will collect up to £315 million (€417.3 million) in taxes by April 2030, which HMRC’s July press release says is enough money to “fund more than 10,000 newly qualified nurses for a year.”

Jonathan Athow, HMRC’s director general for client strategy and tax design, explained in July that the updated framework does not impose any new tax on cryptocurrency investments, but only ensures better compliance with existing capital gains tax.

“These new reporting requirements will give us the information to help people get their tax affairs in order,” he said. “I urge all cryptoasset users to check the details you are required to provide to your provider.”

Compliance challenges

Some tax experts suggest that trading platforms may find it difficult to collect the information HMRC needs, such as tax reference numbers.

“As cryptoasset users may be wary of providing these details, RCASPs [reporting cryptoasset service providers] will have to do a lot of work for them to ensure they have all the required information,” said Dion Seymour, Technical Director of Crypto and Digital Asset at London-based law firm Andersen.

According to Seymour, exchanges will need to ensure they have the systems in place to capture customer information and then report this information to the Internal Revenue Service.

“Failure to carry out required due diligence by RCASPs could result in HMRC imposing fines for failure to comply with late or inaccurate reporting, record keeping, invalid self-certifications, failure to notify reportable users, failure to register and failure to apply due diligence requirements,” he added. “Fines may be imposed per reportable user, which could result in significant fines.”

The process of adapting to the new requirements can therefore be quite costly for platforms, which in turn can be costly for their customers.

“While crypto exchanges are required to pay these additional compliance costs, they will inevitably pass these costs on to their customers,” said David Lesperance, the MD of Lesperance and Associates.

Speak with DeclutterLesperance predicted that two consequences could result from the implementation of the Cryptoasset Reporting Framework, the first of which is a drift towards non-compliant alternatives.

He explained: “Just as happened in the world of banking and brokerage, you will initially see a movement from those who want to continue to avoid tax towards institutions that do not meet the new UK reporting requirements.”

However, Lesperance also believes that international alignment will eventually occur as countries “work together to create a crypto equivalent equivalent to the Common Reporting Standard and US FATCA, which will eventually force most jurisdictions to implement reporting standards.

Borrow and strike

As well as confirming the arrival of reporting requirements, Budget 2025 also confirmed that HMRC would publish a summary of responses to a long-running consultation on the taxation of DeFi activities involving loans and strikes.

It published this summary on Wednesday, the same day as the Budget, indicating that the UK government is currently leaning towards an approach that only recognizes taxable events when a profit is actually realized (i.e. when cryptocurrencies are sold for fiat).

“After several years of discussion, HMRC has agreed on a proposed approach and is seeking to take a ‘no gain, no loss’ approach to crypto lending and providing liquidity,” Seymour explains.

However, the UK government has not yet reached a final decision on this issue and there is no fixed timetable for such a decision.

As Seymour noted: “The government is monitoring its advice, with HMRC tasked with continuing to work with stakeholders to refine any possible approach.”