Ten years ago, someone who held crypto considered themselves to be outside of the regular financial system and relatively free. But, of course, things have changed significantly over the last few years. The tax man is moving in and looking to tax cryptocurrencies like Bitcoin in the same way as other assets.
Many cryptocurrencies, like Bitcoin, have sustained a high value globally for a number of years now, and the digital landscape is changing such that cryptocurrencies as a whole are much more than memes. They are now serious wealth builders which are attracting attention from authorities worth trillions of dollars on the global markets.
The £3,000 trap and HMRC dragnet
Investors in Britain are discovering that the days when crypto gains flew under the radar are officially over. A UK crypto tax is now in the works and on January 1 2026, the government launched the Cryptoasset Reporting Framework (CARF). This new piece of legislation means that crypto exchanges and platforms are now required to automatically collect and report user transaction details and wallet addresses to HMRC. Because CARF is an international framework, overseas platforms will also start sharing information with HMRC.
Failing to declare crypto gains can now result in penalties of up to 100% of the amount due plus interest. HMRC is running voluntary disclosure facilities for anyone wanting to clear up unsubmitted tax gains in the past, but this window may close soon.
At the same time, the capital gains tax allowance has fallen significantly. The annual tax-free allowance for capital gains is stuck at £3,000, and if you buy or sell a single cryptocurrency, it sets up a taxable event. Profits over £3,000 are taxed at over 18% for basic-rate taxpayers and 24% for higher-rate taxpayers.
Changes to stocks and shares ISAs
At the same time, the taxman is tightening the screws on unwrapped holdings, so the battle to protect crypto gains from tax is becoming more challenging.
Previously, it was thought to be possible to protect cryptocurrency ETFs in a tax wrapper. But there was a rule change as of 6 April 2026: stocks and shares ISAs are no longer eligible for new purchases. Legacy holdings bought before 6 April can be grandfathered in and allowed to stay.
The new home for crypto ETNs is the innovative finance ISA (IFISA), which was originally designed for peer-to-peer lending. Consequently, hardly any of the major UK brokerage platforms like AJ Bell or Hargreaves Lansdown offer an IFISA that supports crypto ETNs. As such, it’s becoming more difficult for crypto investors to invest in a tax-free wrapper, meaning that the reporting requirements are even more challenging.
Many UK investors get a £20,000 per year ISA allowance that is tax-free and doesn’t require them to do any additional reporting. Previously, it was possible to obtain exchange-traded funds and other mechanisms to obtain cryptocurrency through this vehicle. Major platforms didn’t hold cryptocurrencies directly but allowed investors to purchase instruments that were linked to the underlying cryptocurrency, so asset values. This avenue is more difficult, and investment houses and the entire ecosystem are struggling to keep up with the changes in the law.
What are investors doing about these changes in 2026?
Given the significant changes to the rules regarding cryptocurrencies and alternative assets, investors are adjusting their playbooks. Many are approaching accountants who can help them navigate challenging financial waters and continue on the desired road to freedom.
Because of this, the number of accountants offering specialised services to cryptocurrency holders is growing significantly. Many people who thought they had bought their way to financial freedom as far back as 2010 are now discovering that governments across the world are moving in to confiscate their wealth. Furthermore, HMRC is extending its tentacles overseas to track what investors are doing internationally. So the number of options are now limited. One way to make the new rules a bit easier to bear is to use an SIPP instead of a Stocks and Shares ISA. These are still eligible for crypto ETN purposes. Self-invested personal pensions are now the primary vehicle for investors wanting to obtain tax-sheltered crypto exposure. Although they come with their own restrictions, such as being unable to withdraw money without tax penalties, it is not a problem at all if they can withdraw money at a lower rate than before retirement age.
Another rule for crypto investors in 2022 is remembering that the UK has a strict same-day and 30-day matching rule. This means that investors can’t sell their Bitcoin in the morning and claim a loss on it in the evening on the same day. Instead, they have to wait until the allocated period has expired before taking advantage of a loss-related tax rule. HMRC treats crypto using Section 104 Pool, which means that you have to calculate the average costs of your tokens together rather than selling, rather than tracking individual buy and sell tickets. This means that it becomes more difficult to do the accounting for cryptocurrencies since it involves an increasing number of calculations.
The number of people getting caught out is increasing, according to Crypto Tax Made Easy, a UK-based crypto accountant. They said:
“We’ve already saved around £27 million for over 650 clients so far. Our goal is to review all of their transactions by hand and then dig out any structure or losses that can turn into a tax shield.”
“What’s interesting is that this process doesn’t need to take long once clients have professional support. Accountants can go through all crypto transactions and then make deductions from taxable income using established rules.”
As with many tax issues, there will likely be legal ramifications from the government’s decisions and changes in the law. Accountants are already making adjustments to their business processes to support cryptocurrency holders in the UK. Because of this, there is an arms race underway where each party is looking to secure their interests. The government obviously wants to tax crypto to raise revenue, while private individuals see it as a source of wealth.
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