Reporting

The UK government has confirmed in its 2025 Budget that it will implement new rules forcing cryptocurrency traders to report personal details to trading platforms from January 1 of next year.

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

Published on Wednesday, this year’s Budget confirms that “information for first reports to HMRC will be collected from 1 January 2026 and reported to HMRC in 2027.”

Investors who don’t provide required details with exchanges could be fined up to £300 ($397), while exchanges will be fined up to £300 per unreported customer.

HMRC will then use provided information to check completed tax returns, identifying any individuals who haven’t correctly reported their cryptocurrency profits.

By doing this, the revenue service forecasts that it will raise up to £315 million ($417.3 million) in tax by April 2030, which HMRC’s press release from July frames as enough money to “fund more than 10,000 newly-qualified nurses for a year.”

Jonathan Athow, HMRC’s Director General for Customer Strategy and Tax Design, explained in July that the updated framework doesn’t impose a new tax on cryptocurrency investment, but merely ensures greater compliance with the existing capital gains tax.

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

Compliance challenges

Some taxation experts suggest that trading platforms may find it difficult to collect the info HMRC will require, such as tax reference numbers.

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

According to Seymour, exchanges will need to ensure that they have the systems in place to record customer information and then report said info to the UK’s tax authority.

“Failure for RCASPs to perform the required due diligence could lead to penalties being applied by HMRC for non-compliance 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. “Penalties can be applied per a reportable user, which could lead to substantial fines.”

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

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

Speaking to Decrypt, Lesperance predicted that two consequences may follow from the implementation of the Cryptoasset Reporting Framework, with the first being a drift towards noncompliant alternatives.

He explained, “Just as happened in the world of banking and brokerage, you will initially see a movement by those wanting to continue to evade tax to those institutions which do not comply with the new UK reporting requirements.”

However, Lesperance also believes that international alignment will eventually take place, as countries “band together to create a crypto equivalent to the Common Reporting Standard and US FATCA, ultimately forcing most jurisdictions to implement reporting standards.

Lending and staking

Aside from confirming the arrival of reporting requirements, the 2025 Budget also confirmed that HMRC would publish a summary of responses to a long-running consultation on the taxation of DeFi activities involving lending and staking.

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

“After several years of discussion, HMRC has settled on a proposed approach and is seeking to adopt a no gain, no loss approach to the provision of lending crypto and providing liquidity,” explained Seymour.

However, the UK government has not come to a final decision on this question, while there is no set timeline for reaching such a decision.

As Seymour noted, “The government is keeping it under advisement, with HMRC tasked to continue engaging with stakeholders to refine any potential approach.”