Crypto Users Forced to Share Account Details with Tax Officials
People buying cryptocurrency in the UK are now required to share their account details with tax officials, facing penalties for non-compliance. This change, effective from January 1, aims to ensure that crypto investors fulfill all tax obligations, including capital gains tax.
New Reporting Requirements for Crypto Users
– Automatic Data Collection: The HMRC (Her Majesty’s Revenue and Customs) will start automatically collecting information from all users of cryptocurrency exchanges—essentially the banks of the crypto industry. This initiative is aimed at recovering tens of millions in unpaid tax.
– Increased Oversight: Amid ongoing consultations on stricter regulations for the cryptocurrency sector, the move seeks to enhance transparency and combat insider trading.
– Historical Context: The value of Bitcoin, often considered an indicator of the whole cryptocurrency market, witnessed a dramatic rise from approximately $93,500 (£69,500) per coin at the beginning of 2025 to a peak of nearly $124,500 before plummeting below $90,000 by year-end. Investors who capitalized on these fluctuations will likely be subject to taxation.
According to Dawn Register, a tax dispute resolution partner at BDO, HMRC has been concerned for some time about high levels of non-compliance among crypto investors. The new regulations will significantly reduce the ability of wealthy crypto individuals to conceal untaxed gains, as tax authorities gain comprehensive insights into users’ transactions.
Responsibilities of Cryptocurrency Exchanges
– Accountability: Cryptocurrency exchanges, acting as financial institutions for digital currencies, must now ensure that they provide up-to-date and accurate records of their users’ earnings.
– Penalties for Non-Compliance: Failure to comply may result in fines imposed on these exchanges, further reinforcing the need for stringent reporting.
Implications of the Cryptoasset Reporting Framework (CARF)
These changes align with the broader Cryptoasset Reporting Framework (CARF) regulations, which are being adopted by multiple countries. This international cooperation will simplify the exchange of information among tax authorities.
In the UK, HMRC estimates there could be thousands of crypto owners with unpaid tax liabilities. They anticipate that the new regulations may yield at least £300 million over the next five years.
Upcoming Tax Filing Deadlines
Dawn Register cautions that anyone realizing crypto gains during the 2024-25 financial year may need to file a tax return by January 31, utilizing a new section in the self-assessment form. HMRC is also looking to encourage voluntary disclosure for those who have unpaid taxes from earlier years wishing to rectify their situations, she adds. They are running a disclosure facility that allows taxpayers to report undeclared gains and outstanding taxes prior to April 2024.
Future Regulatory Developments
In parallel, the Financial Conduct Authority (FCA) is conducting a public consultation, running until February 12, on other proposed cryptocurrency regulations. These include setting standards for exchanges, imposing new responsibilities on brokers, and establishing rules for crypto lending and borrowing.
David Geale, the FCA’s Executive Director for Payments and Digital Finance, emphasized that regulation is coming. He stated, Our goal is to establish a framework that protects consumers, fosters innovation, and strengthens trust. Feedback from stakeholders is welcomed as they finalize these rules.
In conclusion, as crypto users in the UK adapt to new requirements to share account details with tax officials, the landscape of cryptocurrency regulation is evolving rapidly. This shift underscores the importance of compliance and transparency in the ever-changing world of digital currencies.