HMRC Tightens Net on Crypto Holders as CARF Reporting Goes Live

HMRC CARF

UK cryptocurrency holders face increased scrutiny as the OECD’s Cryptoasset Reporting Framework (CARF) takes effect in 2026, requiring exchanges and wallet providers to report user transactions directly to HMRC.

What CARF Means for Crypto Holders

From 2026, cryptocurrency exchanges and wallet providers must automatically report user transaction data to tax authorities.

HMRC no longer needs to request this information individually as it now flows automatically through the CARF framework.

This represents a significant expansion of HMRC’s visibility into cryptocurrency activity.

The Connect system, HMRC’s data analytics platform, will integrate CARF data alongside existing information from banks, property registries, and other sources to identify potential non-compliance.

Scope of Reporting

Under CARF, reportable information includes:

• User identification details
• Transaction values and dates
• Wallet addresses associated with users
• Types of cryptoassets involved
• Aggregate transaction volumes

The framework applies to exchanges, custodial wallet providers, and certain other cryptocurrency service providers operating in participating jurisdictions.

Peer-to-peer transactions and self-custody arrangements remain outside the reporting framework, though other mechanisms may capture some of this activity.

International Coordination

CARF operates as a global framework with over 50 jurisdictions committed to implementation.

This international coordination means UK residents using offshore exchanges cannot assume their activity remains invisible to HMRC.

Data sharing agreements between tax authorities enable cross-border information exchange. A UK resident trading on a Singapore-based exchange may find their transaction data shared with HMRC through bilateral arrangements.

HMRC’s Existing Powers

CARF supplements rather than replaces HMRC’s existing information-gathering capabilities.

The tax authority has previously obtained user data from major exchanges including Coinbase, Bitstamp, and others through formal information requests.

The Connect system aggregates data from multiple sources to identify discrepancies between reported income and apparent wealth or spending patterns.

Cryptocurrency transactions now form part of this comprehensive picture.

CARF Compliance Obligations

UK cryptocurrency holders remain responsible for:

• Reporting capital gains on disposals of cryptoassets
• Declaring income from mining, staking, airdrops, and other receipts
• Maintaining records for at least six years (longer for complex situations)
• Filing Self Assessment returns when required

The standard tax treatment applies: disposing of cryptocurrency (including exchanging one crypto for another) typically triggers Capital Gains Tax. Mining and staking rewards are generally taxable as income upon receipt.

Voluntary Disclosure

Taxpayers with unreported cryptocurrency gains or income should consider voluntary disclosure to HMRC.

The penalties for unprompted disclosure are typically lower than those applied after HMRC identifies non-compliance through its own investigations.

HMRC’s Let Property Campaign and other disclosure facilities may provide models for addressing historical non-compliance, though specific cryptocurrency disclosure arrangements may vary.

Gift Tax Considerations

The US has updated guidance noting that the annual gift tax exclusion reaches $18,000 per recipient in 2026.

While UK tax rules differ, gifts of cryptocurrency between individuals can still trigger Capital Gains Tax for the giver based on market value at the time of gift.

Practical Steps

Cryptocurrency holders should:

• Review historical transactions for unreported gains
• Ensure current tax returns accurately reflect crypto activity
• Maintain detailed records of all transactions including cost basis
• Consider professional advice for complex situations
• Monitor HMRC guidance for any changes to crypto tax treatment

 

If you have any queries relating to cryptocurrency tax reporting or cryptocurrency and blockchain taxation more generally, then please do not hesitate to get in touch.

The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice.

We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.