UK Launches Tax Crackdown on Residents’ Crypto Transactions

The UK will require national crypto exchanges to report transactions from local residents from next year as it closes a gap in reporting rules.

The change will give the tax authority, His Majesty’s Revenue and Customs (HMRC), access to domestic and cross-border crypto transaction data for the first time.

CARF will be deployed in 2027

The change will expand the scope of the Cryptoasset Reporting Framework (CARF), a cross-border reporting framework developed by the Organization for Economic Co-operation and Development (OECD).

The framework enables information sharing between tax authorities around the world and will require crypto asset service providers to conduct due diligence, verify user identities and report detailed transaction information on an annual basis.

The first global exchange of CARF information is expected to take place in 2027.

UK aims to stop crypto escaping common reporting standard

Since CARF is a cross-border framework, crypto transactions that take place directly in the UK would not fall under automatic reporting channels, according to a policy. paper shared by HMRC earlier this week.

Description of the new HMRC measure (Source: British Government)

The aim of extending the scope of CARF to cover domestic users is to prevent crypto from becoming a “non-CRS” asset class that escapes the visibility applied to traditional financial accounts under the Common Reporting Standard.

UK officials also said that by expanding the scope of CARF to domestic activities, tax authorities will have access to a more comprehensive data set to identify instances of non-compliance and better assess taxpayers’ obligations.

UK Proposes ‘No Win, No Loss’ Tax Rule for DeFi

The reporting change and expansion of the scope of CARF in the UK comes shortly after HMRC signaled its support for a “no win, no loss” (NGNL) approach to crypto lending and liquidity pool arrangements earlier this week.

Currently, when a decentralized finance (DeFi) user deposits funds into a protocol, even if it is to monetize those funds or take out a loan against them, this decision could be treated as a disposal and trigger a capital gains tax. NGNL’s move could defer capital gains tax until there is a true economic disposal.

HMRC has published the results of its UK consultation regarding the taxation of DeFi activities related to lending and staking.

A particularly interesting finding is that when users deposit assets into Aave, the deposit itself is not treated as a transfer of capital gain…

– Stani.eth (@StaniKulechov) November 27, 2025

Concretely, NGNL’s proposal could mean that users who deposit cryptocurrencies into lending protocols or contribute assets to automated market makers would no longer be taxed at the time of deposit. Instead, the tax would only apply when they ultimately sell or exchange their assets in such a way as to realize a gain or loss.

The proposal aims to align tax rules with how DeFi actually works. This would also help reduce administrative burden and tax outcomes that do not reflect the economic reality of certain activities taking place in the DeFi space.

The NGNL approach would also apply to multi-token arrangements used in decentralized protocols, which are often complex. For example, if a user receives more tokens than they deposited, the gain will be taxed. However, the transaction will be treated as a loss if the user receives fewer tokens than they deposited.

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