NEW rules are now in force for cryptocurrency investors, requiring them to declare their digital investments to HMRC or risk facing penalties for non-compliance.
The changes apply across the UK and came into effect on 1 January, meaning anyone buying or selling cryptocurrencies must ensure their account details and profits are shared with the tax authority.
People trading cryptocurrencies such as Bitcoin will now have their account information automatically shared with HMRC.
The move is aimed at cracking down on unpaid tax, including capital gains tax made when crypto assets are sold for a profit.
HMRC will begin collecting data directly from cryptocurrency exchanges, which act like banks for the digital currency world.
The clampdown comes as ministers push ahead with tougher oversight of the fast-growing crypto industry.
Regulators want closer scrutiny of trading activity to prevent tax dodging, insider dealing and other financial crime.
BBC reports that the clampdown comes as regulators push ahead with tougher oversight of the fast-growing crypto industry, including measures to prevent insider trading.
Chancellor of the Exchequer Rachel Reeves said: “Bringing crypto into the regulatory perimeter is a crucial step in securing the UK’s position as a world leading financial centre in the digital age.
“By giving firms clear rules of the road, we are providing the certainty they need to invest, innovate and create high skilled jobs here in the UK, while giving millions strong consumer protections, and locking dodgy actors out of the UK market.”
The price of Bitcoin, often seen as a yardstick for the entire sector, surged from around $93,500 (£69,500) at the start of 2025 to almost $124,500 before sliding below $90,000 by the end of the year. Anyone who bought low and sold high could now face a tax bill.
Dawn Register, a tax dispute resolution partner at accountancy firm BDO, said: “HMRC has been concerned for some time about high levels of non-compliance among crypto investors.”
She added that the new rules would make it far harder for wealthy investors to hide untaxed gains, as tax authorities will have far more detail on users and their transactions.
Under the changes, crypto exchanges must automatically share accurate and up-to-date records of users’ earnings.
Firms that fail to do so could face fines.
The rules form part of the international Cryptoasset Reporting Framework (CARF , an international agreement that allows tax authorities in dozens of countries to share crypto data more easily, making it harder for investors to hide money overseas.
HMRC believes that many thousands of people in the UK who hold cryptocurrency may owe unpaid taxes, and expects the new rules to generate at least £300 million in additional revenue over the next five years.
Ms Register warned that anyone who made crypto gains in the 2024–25 tax year may need to file a self-assessment return by 31 January, using a new dedicated crypto section.
“HMRC is also looking to encourage voluntary disclosure where people have unpaid tax in earlier years and want to correct their affairs,” she said.
“HMRC is running a disclosure facility where taxpayers can come clean on undeclared gains and unpaid tax prior to April 2024.”
The Financial Conduct Authority is running a public consultation until 12 February on further crypto rules.
These include tougher standards for exchanges, new responsibilities for brokers, and rules covering crypto lending and borrowing.
At the same time, regulators are signalling that even more stringent measures are on the way.
From 2027, crypto firms operating in the UK will be expected to comply with a regulatory framework similar to that applied to traditional financial institutions, including enhanced transparency and stronger consumer protection requirements.
David Geale, the FCA’s executive director for payments and digital finance, said regulation was inevitable.
“Our goal is to have a regime that protects consumers, supports innovation and promotes trust. We welcome feedback to help us finalise these rules,” he said.
What is cryptocurrency?
Cryptocurrencies are digital currencies that differ from physical money like the pound.
They are created using blockchain technology and are not controlled by governments or central banks such as the Bank of England.
This allows money to be transferred outside the traditional banking system, making it easier to move funds across borders or, in some cases, remain anonymous.
Bitcoin is the most well-known cryptocurrency, but others such as Ethereum have also grown rapidly in value.
How do people invest in crypto?
In the UK, you cannot invest in cryptocurrency funds through ISAs, general investment accounts or pensions. Instead, investors must use specialist trading platforms.
Crypto businesses operating in the UK must be registered with the FCA, and investors are urged to check the Financial Services Regis
The dangers of investing in crypto
HERE are five key risks to keep in mind when investing in cryptocurrencies:
- Consumer protection: Many cryptocurrency investments promising high returns are not fully regulated, apart from anti-money laundering rules. This means you may have limited protection if things go wrong.
- Price volatility: Cryptocurrency prices can rise and fall dramatically, making it easy to lose money. It’s also difficult to reliably determine their value.
- Product complexity: Crypto products and services can be complicated, which makes it hard to understand the risks. Plus, there’s no guarantee you can convert your cryptocurrency back to cash—it depends on market demand and supply.
- Charges and fees: Crypto investments often come with high fees, which can eat into your returns. These fees are often higher than those for regulated investments.
- Marketing hype: Some firms exaggerate potential returns or downplay the risks involved. Be cautious of flashy promotions.
It’s essential to only invest in cryptocurrency if you fully understand how it works and the risks involved.
Remember, there’s no guarantee you can exchange it for real cash, and its value can change drastically in a short time.
If something sounds too good to be true, it probably is.
Always double-check with a trusted friend or advisor if you’re unsure.
Be wary of glowing websites or perfect reviews – fraudsters often create convincing scams.
For tips on avoiding scams, check out our guide.
