UK Expands Crypto Tax Reporting Rules to Cover Domestic Users From 2026

A newly released document by the UK Government confirms that crypto asset service providers will have to collect and report information on customers who are UK-resident individuals and controlling persons, greatly extending the scope of tax transparency in the digital asset sector.

Although CARF was originally designed as an international framework to enable tax authorities to share information about crypto assets, the UK paper makes clear that domestic application is now necessary to maintain the integrity of the country's wider tax-reporting ecosystem. According to the report, cryptoassets have historically sat outside information-exchange systems, such as the Common Reporting Standard, creating what HMRC describes as a "blind spot" that can lead to reduced compliance and gaps in tax data. Extending CARF to UK-resident customers is described as a way to close that gap, with the aim of ensuring that digital asset activity is treated in line with traditional financial products.

Under the new rules, Reporting Cryptoasset Service Providers must collect standardized user-identification information, transaction data, and information related to persons with control over entity accounts. Providers will be required to report information relating to crypto-to-fiat conversions, crypto-to-crypto exchanges, transfers of cryptoassets, and payments made using cryptoassets. The policy paper notes that this information will give HMRC the ability to better compare reported transaction activity with taxpayers' self-assessments, thereby improving the accuracy of tax compliance across the system.

The framework will apply to the 2026 calendar year, with the first reporting deadline set for 31 May 2027. HMRC says that this timeline provides providers with adequate preparation time while ensuring that the UK aligns with the overall CARF implementation schedule internationally. The report also explains that the new domestic requirements come hand in glove with the UK's commitment to implement CARF for cross-border information exchange, creating a unified reporting system that covers both international and domestic crypto activity.

The government estimates that the overall impact on households, markets and public finances will be "negligible," but the administrative burden on service providers will be significant, since they have to conduct due diligence, check user information and retain records for at least five years. It details a range of enforcement mechanisms, including fines for failures in due diligence, invalid self-certifications and failures in recordkeeping standards. These penalties are framed as necessary to make the reporting regime effective.

For UK residents holding or trading crypto, the report makes clear that CARF does not introduce any new taxes. Rather, it provides greater visibility of crypto activity to HMRC, with consistent data that will be able to be matched against the reported income to determine actual transaction patterns. The paper underlines that crypto asset ownership is largely concentrated in discrete UK demographics, essentially younger and primarily male sections, a fact that HMRC contends raises risk of undetected gains if reporting systems do not capture the digital asset activity in a structured manner.

The report also states that including domestic users within the CARF system is important to ensure UK tax rules remain future proof as crypto asset usage evolves. As digital assets continue to grow in use for investment, making payments, or transfers, HMRC says there will be a real need for a consistent reporting framework to retain fairness within the wider tax system. Without domestic inclusion, the report warns that significant gaps would remain and undermine the purpose of CARF, creating incentives for users to shift their activity into domestic accounts to avoid international reporting.

At the same time, the government realizes that there are areas which present certain complexities-for example, with regard to the treatment of decentralized systems and arrangements where no service provider is clearly responsible for administering accounts. The report mentions that, in particular, such areas may require further consideration or guidance in due course, although this framework will have a clear focus on service providers with readily identifiable reporting responsibilities.

The UK's decision to extend CARF domestically represents a turning point in the regulation of digital assets. By including UK-resident crypto users within the reporting framework, HMRC is indicating that crypto activity will henceforth be scrutinized with the same level of detail as already applied to bank accounts and other financial holdings. While the rules won't change the tax burden on crypto investors, they will restructure the enforcement landscape by giving HMRC direct access to detailed transaction information for the first time. With the first reports due in 2027, both users and service providers will need to prepare for a more transparent and closely supervised reporting regime.