A lot has happened in the regulatory world when it comes to cryptocurrencies which has changed how some exchanges, conversion platforms and payment cards work with their customers and how tokens are treated by financial legislation.
Whilst the biggest changes have undoubtedly been seen in the United States, including plans for a strategic crypto reserve according to the BBC, a lot of changes in focus have been seen in how the UK treats cryptocurrency as well.
One of these is a regulatory alignment, which includes a crackdown on crypto holders who are not currently paying the tax they need to on their tokenised assets, according to a press release by HM Revenue and Customs.
Here is what to expect in January 2026, what UK token holders need to do and why this is being implemented.
What Is The HMRC Crypto Crackdown?
As part of a set of new Financial Conduct Authority regulations regarding what the UK government describe as “cryptoassets”, more stringent rules regarding activity reporting and user information are set to be implemented.
This means that crypto providers need to collect identification information that would typically be required for traditional financial entities.
According to Gov UK, this includes a user’s legal name, date of birth, address and country where they typically live, as well as their tax identification number. They will also provide a report of crypto transactions that have taken place on their platform.
Service providers must provide this information or they will be fined up to £300, something that quickly adds up given that some exchanges can have potentially millions of users.
Similarly, individuals found to not have paid what they are supposed to in tax, either as part of income or Capital Gains Tax, could potentially face fines or criminal prosecution depending on the scale and intent of tax evasion.
Why Is There A Clampdown?
This change and intensification of approach was not unexpected; cryptoassets that had an exchange value (ie cryptocurrency) were treated like any other assets under the Capital Gains Tax rules that had been published since 2018.
This reporting framework and the clampdown that has inevitably emerged as a result is as much about realignment and enforcing existing rules with a more stringent approach than it is about changing the rules that the vast majority of crypto holders have worked with for years.
This has been made easier by changes to the Self Assessment tax return system, which has added a section for cryptoassets.
There is a voluntary disclosure system that can help holders avoid penalties if they do not declare the tax they are legally required to pay.
As well as this, the new rules bring HMRC in line with OECD international standards when it comes to transparently recording taxes when it comes to cryptocurrency and other crypto assets, as well as furthering plans to crack down on tax avoidance more broadly.
When Does It Apply To Crypto Holders?
The main historical focus when it comes to cryptocurrency and tax has been on Capital Gains Tax, which is the tax on the profit made when selling (or otherwise getting rid of) an asset that has increased in value.
The rules for cryptoassets that have been sold for a profit are broadly similar to those of other types, including the exceptions when it comes to charity or giving them to a spouse/civil partner.
There are certain allowable costs that can be deducted, although anything that has already been deducted as part of income tax and any costs that are part of mining activities is typically not allowed to be deducted from Capital Gains Tax.
However, gas fees, the costs for advertising, drawing up a contract and costs that are accrued when making a valuation of a particular asset for determining how much is gained are typically deductible.
The taxes that you may need to pay for receiving cryptoassets can vary depending on the type of assets you earn, how you acquired them and how readily convertible they are to another asset.
You do not pay tax when buying tokens, but you may need to pay tax if you receive them as part of a liquidity pool, mine them, stake them or lend them as part of a DeFi arrangement that gives you tokens, with a maximum allowance of up to £1,000 per year.
If you are paid in crypto then that will be considered “money’s worth” by HMRC, because it is of direct monetary value or it can be converted into money. It is worth checking with your employer to see if it has already been paid through PAYE or if you need to file a Self Assessment tax return.