Cryptoassets – Tax and reporting
For the majority of people, cryptoassets such as Bitcoin are something they see mentioned regularly in the media but of which they have little or no understanding. There are, though, many individuals (not just the very wealthy) who get involved in buying and selling these assets. Very large profits (or losses!) can result from the often rapid and substantial price movements.
Have you dabbled in cryptoassets? If so, there are tax and reporting developments of which you should be aware.
Tax
HMRC do not consider that transactions involving cryptoassets amount to gambling, which is normally exempt from income tax and CGT. Additionally, if the person is not a regulated dealer or the activity is not part of a wider existing trade dealing in other types of financial assets, HMRC is likely to resist any argument that someone is trading. (Trading treatment would be beneficial where losses are made, as the losses could be set against other income.)
Assuming it is a capital transaction, the normal calculation rules follow (e.g. as regards deductible costs of disposal), with CGT payable on any gains above the annual exempt amount (£3,000).
HMRC treat cryptocurrency as being located where the holder is resident. Thus, someone resident in the UK when they make any profit will be subject to UK tax, even if they bought the asset outside the UK.
The biggest practical problem from a tax perspective is often getting the information needed about additions and disposals, particularly where someone has been involved in a lot of transactions and has their records spread around various digital wallets.
Cryptoasset Reporting Framework (CARF)
The CARF will require cryptoassets service providers (CASPs) to report transactional information on cryptoassets transactions to HMRC annually. It applies from 1 January 2026, but the first reports will not be due until 2027.
The reporting obligation will apply in relation to customers resident in:
– the UK; or
– one of the countries on a list to be provided by HMRC in due course.
HMRC will also receive information from other jurisdictions about UK resident individuals. This multi-national operation is aimed at reducing tax evasion and money laundering.
If you have been involved in buying and selling cryptoassets, make sure you understand the tax rules and what records you need to keep. We can help with this if you are unsure.
