Tracking crypto-asset tax rules in 2026 and beyond

This blog provides an overview of some of the important developments in the taxation of crypto-assets in 2025, and considers what 2026 may bring for taxpayers and advisers alike.

It is based on an article that was published in Law360 on 11 December 2025.

Crypto-assets: developments in 2025

Once dismissed as a passing fad, crypto-assets are now an established part of the UK's financial landscape, and 2025 saw an increasing amount of regulation in this area — from increased compliance interventions to new policy developments and targeted 'nudge' campaigns by HMRC. 

In April last year, HM Treasury published the draft Financial Services and Markets Act 2000 (Regulated Activities and Miscellaneous Provisions) (Cryptoassets) Order 2025, which aims to create new regulated activities for crypto-assets. If implemented, the order will bring a number of crypto-asset activities within the remit of the FCA, and will mean that firms and individuals conducting certain activities will need to apply for FCA authorisation before carrying out any of them by way of business in the UK To that end, in September 2025, the FCA published a consultation paper on the proposed changes and is seeking feedback from affected parties.

Also in 2025, the FCA announced that the ban on offering crypto exchange-traded notes to retail investors would be lifted from 8 October 2025, signaling a further step toward integrating crypto-assets into mainstream financial markets.

Research published in March 2025, commissioned by the FCA, highlighted the scale of this shift. As of August 2024, 12% of UK adults (around 7 million people) reported owning crypto-assets, up from 10% in 2022 and just 4.4% in 2021. Crypto-asset ownership remains concentrated among younger, predominantly male investors, with Bitcoin and Ethereum the most commonly held crypto-assets. While one-third of investors held crypto-assets worth £100 ($133) or less, a small, but statistically significant increase, was observed among those holding crypto-assets worth between £1,001 and £5,000, suggesting a gradual deepening of engagement within the retail market.

The growing use of crypto-assets presents UK regulators with a range of novel and complex challenges, heightened by both the relatively young investor base and the fast-evolving nature of the sector itself. When it comes to taxation, those challenges are explicitly acknowledged in HMRC's published guidance, which recognises that the tax treatment of crypto-assets continues to develop due to the evolving nature of the underlying technology and the areas in which crypto-assets are used, and that HMRC's views may also evolve accordingly. HMRC's guidance sets a clear tone for taxpayers holding crypto-assets: uncertainty remains high and with it the risk, for both individuals and businesses, of inadvertently falling foul of the UK's tax rules is significant.

Crypto-asset reporting framework implementation

A persistent challenge for regulators in the crypto-asset space is simply identifying those who hold or transact in crypto-assets. The Cryptoasset Reporting Framework (CARF), is designed to address that gap and strengthen global tax transparency by facilitating the automatic exchange of tax-relevant information relating to crypto-asset activity.

The UK has implemented CARF, through the Reporting Cryptoasset Service Providers (Due Diligence and Reporting Requirements) Regulations 2025, which imposed new obligations on crypto-asset service providers and their customers from 1 January 2026. HMRC estimates that these measures will raise an additional £80 million in tax revenue by 2029-2030.

Under CARF, UK businesses that enable crypto-assets to be bought, sold, transferred or exchanged, called reporting crypto-asset service providers, will be obliged to undertake due diligence to identify crypto-assets users. This will require reporting crypto-asset service providers, to collect self-certificates from crypto-asset users, validate the content of those certificates and maintain clear audit trails of the due diligence process. Reporting crypto-asset service providers will also be required to collect aggregate transaction data on their customers' crypto-asset activities.

Similarly, users will be required to provide self-certification information to reporting crypto-asset service providers. For individuals, this will include a name, date of birth, address and national insurance number or unique taxpayer reference number, whilst for entities it will include the business address and company registration number.

Self-certification information must be reported to HMRC by reporting crypto-asset service providers where the user is tax resident in the UK, or another jurisdiction that applies CARF. HMRC will then exchange the information with other CARF jurisdictions. Penalties for noncompliance apply to both reporting crypto-asset service providers and users and range from £100 to £5,000, depending on the nature of the failure.

In recent years, the sources of information available to HMRC have given it an unprecedented insight into the financial affairs of UK taxpayers. However, HMRC's guidance acknowledges that the rapidly expanding and developing nature of crypto-assets means that tax authorities have historically had limited means to gather data on crypto-asset users, creating a notable gap in their information gathering processes.

The implementation of CARF will significantly improve HMRC's visibility in this area, enabling it to identify taxpayers with potential crypto-asset holdings more readily and to target its compliance interventions and 'nudge' campaigns with far greater precision.

HMRC 'nudge' campaigns

HMRC uses nudge campaigns as part of its compliance strategy to encourage taxpayers to voluntarily disclose information relevant to their tax affairs. These campaigns involve targeted letters, emails or messages prompting individuals or businesses to review or correct their tax affairs. The aim of such campaigns is to promote voluntary compliance and resolve potential issues without resorting to formal tax inquiries or investigations.

HMRC's deployment of nudge campaigns has increased significantly in recent years, including in relation to crypto-assets. There was a 134% increase in the number of nudge letters sent to individuals suspected of owing tax in respect of their crypto-asset dealings in the 2024/25 tax year (HMRC sent 67,000 such letters in that period).

This rise in activity likely reflects both the growth in crypto-asset ownership, and a broader and more pressing issue: many taxpayers appear to be struggling to understand and meet their tax obligations in relation to crypto-assets. Given the demographics of typical crypto-asset owners and the rapid evolution of the sector, this is perhaps not surprising, but it also suggests a need for greater information and education about the tax implications of owning and dealing in crypto-assets.

HMRC's increased reliance on nudge campaigns targeted at crypto-asset owners can be taken as a tacit acknowledgment that compliance in this area is challenging. Indeed, we have identified two recurring issues in this area:

• many existing tax provisions are not well suited to the unique and sophisticated nature of crypto-assets, making their application difficult; and
• HMRC itself is still developing its understanding of how crypto-assets and their underlying technologies operate, which can hamper the efficient resolution of crypto- asset based enquiries.

For now, the soft-touch approach of alerting taxpayers to potential issues and giving them an opportunity to put things right in a relatively non-confrontational way, including through the use of HMRC's Cryptoasset Disclosure Service, appears to be HMRC's preferred strategy. However, this stance is unlikely to persist indefinitely, particularly in the current economic climate, where HMRC finds itself facing ever-growing pressure to increase the tax yield. It is therefore likely that if compliance rates do not improve, HMRC will shift from the current gentle nudge-based approach to a more assertive and less forgiving enforcement strategy.

Information and education

HMRC appears to have recognised the need for clearer and more accessible information to help taxpayers understand their tax responsibilities regarding crypto-assets.

From the 2024/25 tax year onward, the self-assessment tax return has been updated to include a dedicated crypto-assets section. In addition, HMRC has, over the past year, issued a series of updates to its crypto-asset guidance and manuals. These include, for example, revised guidance on calculating gains on the disposal of crypto-assets and information on the forthcoming changes introduced by CARF.

2026 and beyond

Taxpayers can expect a marked increase in HMRC's compliance activity in relation to crypto-assets space in the year ahead and beyond. Individuals who own or trade crypto-assets, especially in significant volumes, are increasingly likely to find themselves the focus of attention from HMRC.

In particular, we anticipate a rise in data-driven compliance following the implementation of CARF at the start of 2026. With access to substantial new data relating to crypto-asset ownership and transactions, HMRC will be able to identify risks and target its compliance activities more effectively than it has been able to do in the past.

As well as the crypto-asset-specific implications, taxpayers should not underestimate the extent to which this new information may broaden the scope of HMRC enquiries into their wider tax affairs, especially where transactions have occurred offshore in another CARF jurisdiction. Those with significant offshore assets will already recognise the parallels with the impact that the Common Reporting Standard has had on HMRC's compliance activity.

The introduction of CARF will almost certainly create transitional issues for both reporting crypto-asset service providers and their customers, which means that there are also likely to be practical challenges for reporting crypto-asset service providers and users as the CARF regime beds in.

Conclusion

Reporting crypto-asset service providers, in particular, must ensure that they fully understand and are able to comply with their new regulatory obligations (from 1 January 2026), to avoid finding themselves at the sharp end of HMRC compliance interventions.

In light of the anticipated increase in HMRC's compliance activities, taxpayers holding crypto-assets should also review transactions from prior years to ensure that there are no gaps in their tax compliance. Where issues are identified, they should take steps to correct the position promptly, and before HMRC contacts them.

Finally, the growth in both the number of taxpayers holding crypto-assets and HMRC's increased activity in this area, means that crypto-asset-related tax issues will become an ever more significant part of the tax landscape. Practitioners must therefore develop a solid understanding of crypto-assets and the underlying technology if they are to be in a position to properly support and advise their clients. This is no small task, but an increasingly essential one.