This article is intended as an informative piece and is not tax or financial advice. If you are unsure of the treatment of a transaction, we encourage you to seek the appropriate advice.
Popularity of Cryptoassets in the UK
The UK Financial Conduct Authority’s latest research into cryptoassets revealed that the proportion of UK adults holding cryptoassets declined in 2025, dropping from 12% to 8%.
While the proportion of ownership remains double what it was in 2021, the FCA study also revealed a notable decline in understanding of cryptocurrencies over recent years.
According to the FCA’s research, only 71% of the respondents correctly identified the definition of cryptocurrency from a list of statements, down 4% from 2020. This suggests a concerning lack of knowledge around the alternative asset.
So, what is a Cryptoasset?
Cryptoassets are digital representation of value that relies on a cryptographically secured distributed ledger or similar technology to validate and secure transactions. There are many different types of cryptoassets, which all work in different ways.
The main types of cryptoasset include exchange tokens, security tokens and stablecoins. Despite commonly being referred to as ‘currency’, they are not actually considered currency or money by HMRC.
The tax treatment of tokens is dependent on the nature and use of the token, rather than the definition of the token itself.
HMRC is Cracking Down on Crypto
Research by HMRC has suggested that tax non-compliance among crypto investors could range from as high as 55% to 95%.
In response, the tax authority has increased its focus on cryptoassets in recent years, launching Crypto Disclosure Campaign in 2023 and sending an increasing number of ‘nudge letters’ to those it suspects are failing to pay the correct tax on their crypto gains.
Since launching a crackdown on crypto tax evasion, HMRC has reportedly recovered more than £8mn from settlements. According to figures obtained by the Financial Times through a Freedom of Information request, 502 crypto investors reached disclosure settlements with the UK tax authority over unpaid tax in the past two years.
In the 2024-25 tax year, 280 individuals settled with HMRC, making payments totalling £3.5mn. In 2025-26, the number of settlements dropped to 222, but the total value of payments increased to around £4.8mn.
Taxes on Cryptoassets
Despite becoming more mainstream investments in recent years, many owners of cryptoassets are not fully aware of their tax obligations.
HMRC and Kantar UK found that under half (42%) of cryptoasset owners they surveyed were aware that they might be liable to pay tax when they bought goods and services using cryptocurrency. Awareness of the potential tax liability was higher among those who had seen HMRC’s cryptoasset tax guidance and who already had a good understanding of Capital Gains Tax, however.
In most cases, individuals who hold cryptoassets as a personal investment – typically for capital appreciation or to make purchases – will be liable to pay Capital Gains Tax when they dispose of those assets. Individuals may be liable to pay Income Tax and National Insurance contributions on cryptoassets received as a form of non-cash remuneration from an employer, or through activities such as mining, staking, or airdrops.
Where an individual’s cryptoasset activities are considered by HMRC to constitute trading, Income Tax treatment will generally take precedence over Capital Gains Tax. Whether an activity amounts to trading will depend on the specific facts and circumstances of each case.
Capital Gains Tax & Cryptoassets
Cryptoassets are digital assets and are, therefore, intangible. However, for Capital Gains Tax purposes, they are still treated still chargeable assets as they are capable of being owned and have a value that can be realised.
Individuals must calculate any gain or loss arising on the disposal of their cryptoasset to determine whether a Capital Gains Tax liability arises. The term disposal is broad and includes:
- selling cryptoassets for cash
- exchanging one type of cryptoasset for another
- using cryptoassets to pay for goods or services
A disposal does not occur, in the eyes of HMRC, where the individual retains beneficial ownership of the asset throughout the transaction. For example, transferring tokens between public addresses or wallets that are beneficially owned and controlled by the same individual would not constitute a disposal for Capital Gains Tax purposes.
The Location of Cryptoassets
Cryptoassets are digital in nature and, as a result, do not have an obvious geographical location. Nevertheless, it is necessary to determine their location (or situs) for tax purposes.
Where a cryptoasset is simply a digital representation of an underlying asset, the situs of the cryptoasset will generally follow the location of the underlying asset. Where a cryptoasset exists as an asset in its own right and is distinct from any underlying asset, HMRC’s view is that the statutory situs rules, as outlined in the Taxation of Chargeable Gains Act 1992, do not apply. In such cases, the situs of the cryptoasset is determined by the residence of its beneficial owner.
HMRC views the beneficial owner’s residence as providing a logical, predictable and objective basis for determining the location of cryptoassets. Consequently, tokens beneficially owned by a UK-resident individual are treated as situated in the UK. Residence is determined in accordance with the UK Government’s Statutory Residence Test.
Crypto Asset Reporting Framework (CARF)
Since 1 January 2026, cryptoasset exchanges and other cryptoasset service providers in the UK, such as dealers and brokers, have been legally required to collect information about their users and their transactions.
The information required under the Cryptoasset Reporting Framework (CARF) includes:
- Users’ full name or legal business name
- Tax identification numbers
- The value of users’ transactions
- The type of transactions made by users
The legislation aims to give HMRC a clearer picture of crypto activity in the UK and enhance their ability to detect undeclared gains and impose penalties for non-compliance.
If providers don’t comply, they could be charged a penalty of up to £300 per user.
The first reports under these requirements are due to be submitted to HMRC by 31 May 2027 and will cover transactions and reportable information relating to the 2026 calendar year.
CARF is a global initiative led by the OECD. Currently, 76 countries have committed to following the framework and exchanging information with each other.
The Importance of Good Record Keeping
Cryptoasset exchanges may retain transaction records for only a limited period and, in some cases, an exchange may cease operating before an individual comes to complete their tax return. The responsibility therefore rests with the individual to maintain their own records of all cryptoasset transactions.
These records should be retained to support any tax return disclosures and made available to HMRC in the event of an enquiry. They form an important part of the audit trail from acquisition through to disposal, providing evidence of the transactions undertaken, the calculations performed and any gains or losses realised.
Reporting on Cryptoassets: UK Self Assessment
Self Assessment return pages for individuals and trusts now contain a reporting section specifically for cryptoassets, contained within the Capital Gains Tax pages.
The section was introduced in the 2024-25 Self Assessment returns. Previously, gains and losses on cryptoassets were reported within the broader “other property, assets and gains” category of the Self Assessment return.
It requires taxpayers to distinguish between gains and losses arising from cryptoassets and those arising from other investment assets. This reflects the increasing prominence of cryptoassets within the UK tax landscape and the growing need for more detailed and transparent reporting.
CGiX already includes a dedicated cryptocurrency asset classification. As a result, customers who trade cryptoassets can readily identify and report the capital gains and losses associated with those holdings, ensuring they are well prepared for the reporting requirements.