For years, many UK residents holding bitcoin and other digital assets have convinced themselves these holdings were outside the reach of HMRC.
That era is ending as tax authorities implement new rules and enforcement strategies, making even modest transactions subject to scrutiny.
End of tax myths
A persistent misconception among UK investors has been that tax is only owed when converting bitcoin to pounds.
However, HMRC’s guidance clarifies that any disposal—including swapping bitcoin for another token, spending it, or gifting it—can trigger a capital gains tax event.
The Bitcoin and Crypto Accountant explained:
“Even if you didn’t sell anything, you might still need to file earned staking or yield income, received airdrops, paid in crypto, mined or validated blocks. These count as income, not capital gains.”
This distinction is catching many off guard, especially those participating in frequent token swaps or decentralized finance transactions.
Data sharing and enforcement
HMRC’s investigative reach has expanded significantly thanks to the OECD’s Crypto-Asset Reporting Framework (CARF).
Major exchanges, including Coinbase and Binance UK, are now required to share Know-Your-Customer (KYC) and transaction data with tax authorities.
This enables HMRC to link wallet addresses to taxpayer records and cross-check reported income, making it harder for investors to remain undetected.
Reduced capital gains allowance
The capital gains tax (CGT) allowance has dropped to £3,000 for the 2024/25 tax year, down from £12,300 in 2022/23.
Now, even a few successful bitcoin trades or swaps can push individuals above the reporting threshold.
Many retail investors are realizing—sometimes too late—that each exchange transaction can be taxable.
Penalties and compliance push
HMRC’s penalties for non-compliance are severe, ranging from 10% to 200% of the tax owed, and can include criminal charges in cases of deliberate evasion.
The agency has begun sending warning letters and is using exchange data to identify underreporting.
Tax professionals are seeing a surge in queries as investors scramble to reconcile years of activity before the tax year closes.
