The UK will require cryptocurrency platforms to share user account details and earnings with HM Revenue & Customs beginning 1 January 2026, a regulatory step designed to close tax gaps tied to crypto trading and other on‑chain income. Under the new rules, exchanges must automatically provide HMRC with data on users’ realised earnings so the tax authority can identify unpaid tax liabilities and tax gains that have previously gone unreported.

HMRC projects the measures will generate at least £300 million over the next five years and expects the reporting will prompt thousands of crypto holders to file new returns or amend past ones to account for taxable gains. The obligation to report is focused on earnings data supplied by platforms, shifting the initial burden of detection from HMRC’s investigative processes to a routine, automated flow of information from intermediaries.

Why this matters to markets and users

• Transparency and enforcement: Mandatory exchange reporting makes it materially harder for investors to conceal untaxed disposals or income. Routine data flows to HMRC align the UK with international moves to increase transparency around crypto activity and reduce opportunities for cross‑border tax avoidance.
• Record keeping and compliance risk: Traders and investors who have not maintained transaction histories or cost‑basis records face heightened compliance risk. HMRC’s access to platform records will allow it to identify discrepancies and demand corrections or back taxes.
• Behavioral and product impacts: The change favours custodial platforms that can report reliably and could push some activity toward non‑custodial wallets, decentralised exchanges, or privacy‑oriented instruments—each of which may in turn attract regulatory scrutiny or specific countermeasures. Products that generate frequent, short‑term taxable events will create more reporting triggers and paperwork for holders.

Operational implications for exchanges and users
Exchanges will need to implement or expand automated reporting processes, standardise the format of earnings data, and likely upgrade compliance teams to respond to HMRC queries. Users should expect requests for identity confirmation and be prepared to reconcile platform statements with their own records. HMRC’s projection that the rules will uncover significant unpaid tax suggests follow‑up activity such as targeted letters, voluntary disclosure windows, or audits for identified mismatches.

Tax mechanics to watch
Routine reporting of realised gains and income will accentuate the distinction between taxable disposal events and unrealised price movements. Traders who habitually convert crypto to fiat, swap between assets, or receive staking and rewards are likely to generate taxable events that can now be matched to platform records. For projects with designs that encourage frequent turnover—such as tokens engineered around short holding cycles—holders may find the tax administration consequences more immediate than under a lower‑activity model. As an illustration of token design affecting taxable profiles, some fixed‑price entry models with predefined short holding cycles are intentionally structured to manage sell pressure and participant timing, which in turn concentrates taxable events into predictable windows.

Industry and international context
The UK measure dovetails with broader global efforts to bring crypto into existing tax transparency regimes. Expect coordination with counterpart authorities and potential data‑sharing agreements that extend the reach of these reporting rules beyond UK borders. Regulators moving to make intermediaries the primary reporting point also raise the prospect of regulatory arbitrage, but the administrative and reputational costs of non‑compliance make licensed platforms likely early adopters of robust reporting.

Source reference: https://www.bbc.co.uk/news/articles/ckgl2je65klo