HMRC to introduce rules for Crypto holders as fresh tax crackdown launched
HMRC is ramping up pressure on cryptocurrency users with the introduction of new measures aimed at curbing tax avoidance.
From January 1, 2026, individuals buying and selling cryptocurrencies like Bitcoin and Ethereum will need to provide their personal information to the platforms they use.
The move is designed to clamp down on tax avoidance and ensure that individuals and businesses are paying the correct amount of tax on their crypto dealings.
Users will need to provide their name, date of birth, address, and national insurance number (or tax identification number for non-UK residents).
Businesses dealing in cryptocurrency will also have to share their company information.
The new regulations mean that platforms will be obliged to collect and report data on every transaction, including the amount, the type of cryptocurrency, and the nature of the transaction.
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This data collection will give HMRC a much clearer picture of crypto-related income and potential tax liabilities.
Platforms that don't follow the new rules could be fined up to £300 per user for providing incorrect, incomplete, or unverified information.
In the UK, you need to report crypto earnings to HMRC because any profit you make from selling, exchanging, or using cryptocurrency can be subject to capital gains tax (CGT) or income tax.
You're liable to pay CGT on crypto when you dispose of it (e.g. sell it, trade it, gift it) and make a profit that exceeds your annual CGT allowance, which is currently £3,000 a year.
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The amount of CGT you'll pay in the UK depends on your income tax band.
If you're a basic rate taxpayer, you'll pay 18% CGT on those profits.
If you're a higher rate taxpayer, you'll pay 24% CGT.
Even with new data sharing between platforms and the tax authorities, you must still complete a self-assessment tax return if:
- Your total taxable gains from cryptoassets exceed the annual tax-free allowance (£3,000).
- You receive cryptoassets as part of your employment, but income tax and national insurance haven't been deducted through PAYE.
- Your total income, including earnings from crypto-related activities, is higher than the annual tax-free allowance.
The latest move is part of a wider effort by HMRC to tackle tax non-compliance in the digital economy, following similar measures targeting income generated through online platforms such as Airbnb and Vinted.
Seb Maley, chief executive of tax insurance provider Qdos, said: "HMRC is casting its net far and wide as it looks to crack down on suspected tax avoidance among cryptocurrency holders.
"By collecting the personal information of those buying and selling crypto - along with the values being exchanged - HMRC will know how much tax should be paid on these assets.
"In simple terms, if the income a taxpayer declares on their self-assessment tax return doesn't match up with the amount reported by these platforms, HMRC has the information it needs to launch a tax investigation."
What is cryptocurrency?
Cryptocurrencies differ from physical currencies, such as the pound.
They are created using blockchain technology and part of their appeal is that they are not controlled by governments or a central bank, such as the Bank of England.
It means the currency can be used to transfer wealth outside of the traditional banking system, making it easier to cross borders or stay anonymous when moving wealth.
Bitcoin is the leading cryptocurrency but its rise has helped other cryptocurrencies also grow in value, such as Ethereum.
In recent years, more mainstream companies and institutions have invested in cryptocurrency, and part of the recent rise in value is based on President Trump's favourable views on cryptocurrency.
The dangers of investing in crypto
HERE are five key risks to keep in mind when investing in cryptocurrencies:
- Consumer protection: Many cryptocurrency investments promising high returns are not fully regulated, apart from anti-money laundering rules. This means you may have limited protection if things go wrong.
- Price volatility: Cryptocurrency prices can rise and fall dramatically, making it easy to lose money. It’s also difficult to reliably determine their value.
- Product complexity: Crypto products and services can be complicated, which makes it hard to understand the risks. Plus, there’s no guarantee you can convert your cryptocurrency back to cash—it depends on market demand and supply.
- Charges and fees: Crypto investments often come with high fees, which can eat into your returns. These fees are often higher than those for regulated investments.
- Marketing hype: Some firms exaggerate potential returns or downplay the risks involved. Be cautious of flashy promotions.
It's essential to only invest in cryptocurrency if you fully understand how it works and the risks involved.
Remember, there's no guarantee you can exchange it for real cash, and its value can change drastically in a short time.
If something sounds too good to be true, it probably is.
Always double-check with a trusted friend or advisor if you're unsure.
Be wary of glowing websites or perfect reviews - fraudsters often create convincing scams.
For tips on avoiding scams, check out our guide.
How do people invest in crypto?
In the UK, you cannot invest in cryptocurrency funds through stocks and shares ISAs, general investment accounts, or pensions due to regulations.
If you want to invest in Bitcoin or other cryptocurrencies, you’ll need to use specialist trading platforms like Coin Bureau or PlanB.
These platforms allow you to own crypto as a financial asset, though some accounts may not let you spend it.
Crypto businesses in the UK must register with the Financial Conduct Authority (FCA).
To check if a business is registered, visit the Financial Services Register at register.fca.org.uk/s/search?predefined=CA.
There’s also a list of unregistered businesses at register.fca.org.uk/s/search?predefined=U.
Businesses on this list may be operating illegally.
If you don’t want to invest in cryptocurrencies directly, you can still gain exposure to the market by investing in companies involved in the crypto space.
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For example, you could invest in companies that hold Bitcoin or facilitate crypto trading.
A popular option for UK investors is buying shares in MicroStrategy, a US company that actively invests in Bitcoin.
Protect yourself from crypto scams
CRYPTO investment scams are on the rise with reports more than doubling since 2020, according to the FCA.
Fraudsters often advertise on social media and may use images of celebrities to promote scams.
Or scammers may contact your directly through private messages pretending to be a reputable company.
You could also come across scams by searching online through the likes of Google.
Scam adverts typically link to professional-looking websites, where fraudsters may manipulate software to fake prices and investment returns.
Once you’ve handed over money, scammers may act quickly, closing your account and taking your money.
Or they may continue the pretence, to encourage others to invest and you might not realise it's a scam until you try to sell.
Scammers are more likely to contact you out of the blue or pressure you to invest quickly.
Firms offering crypto products in the UK must be registered with the FCA or have permission to promote them.
The FS Register will show you which firms are registered, you can check it at register.fca.org.uk.