UK Budget 2025: Crypto Reporting Rules & Tax Impact

The Cryptoasset Reporting Framework (CARF), first introduced as part of an international agreement with the OECD, represents the UK government’s most significant step toward bringing cryptocurrency transactions under formal tax surveillance. According to the 2025 Budget confirmation, information for first reports to HMRC will be collected from January 1, 2026, with the initial reporting to the tax authority scheduled for 2027. The framework requires reporting cryptoasset service providers (RCASPs) to provide HMRC with comprehensive customer data, creating a systematic approach to tracking cryptocurrency movements and profits.

Jonathan Athow, HMRC’s Director General for Customer Strategy and Tax Design, emphasized in July that the updated framework does not impose a new tax on cryptocurrency investment but rather ensures greater compliance with existing capital gains tax obligations. “These new reporting requirements will give us the information to help people get their tax affairs right,” he stated, urging all cryptoasset users to verify the details they will need to provide to their service providers. The government’s projection of £315 million in additional tax revenue by April 2030 underscores the scale of undeclared cryptocurrency gains currently escaping HMRC’s notice.

The new regime carries significant financial consequences for both investors and exchanges who fail to comply. Individual investors who don’t provide required details to exchanges face fines of up to £300 ($397), while exchanges themselves risk penalties of £300 per unreported customer. Dion Seymour, Crypto and Digital Asset Technical Director at London-based law firm Andersen, highlighted the practical challenges exchanges will face in collecting this information. “As cryptoasset users can be wary of providing these details, RCASPs will have their work cut out for them to ensure they have all the required information,” he explained.

Seymour further detailed the extensive compliance burden facing exchanges, noting they must establish systems to record customer information and report it accurately to HMRC. “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. The potential for penalties to be applied per reportable user means exchanges face substantial financial exposure if their compliance systems prove inadequate.

The implementation costs for exchanges adapting to these new requirements are expected to be substantial, and industry experts predict these expenses will ultimately be borne by consumers. David Lesperance, Managing Director of Lesperance and Associates, told Decrypt that “while the crypto exchanges are required to pay for this additional compliance cost, inevitably they will pass those costs onto their customers.” This cost transfer could make compliant platform trading more expensive, potentially altering the competitive landscape of cryptocurrency trading in the UK.

Lesperance predicted two significant market consequences from the Cryptoasset Reporting Framework implementation. “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,” he explained. However, he also anticipates international alignment will eventually emerge 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.” This suggests the UK’s move may represent the beginning of a broader global trend toward cryptocurrency transaction reporting.

Alongside the CARF implementation, the 2025 Budget revealed progress on the taxation of decentralized finance (DeFi) activities involving lending and staking. HMRC published a summary of responses to its long-running consultation on DeFi taxation, indicating the government is currently leaning toward recognizing taxable events only when gains are actually realized—that is, when cryptocurrencies are sold for fiat currency. This approach would provide greater clarity for DeFi participants who have faced uncertainty about when tax obligations are triggered.

Dion Seymour of Andersen law firm explained the significance of this development: “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.” However, the UK government has not reached a final decision on this matter, and there is no established timeline for resolution. As Seymour noted, “The government is keeping it under advisement, with HMRC tasked to continue engaging with stakeholders to refine any potential approach,” leaving DeFi participants awaiting final regulatory clarity.