HM Revenue and Customs (HMRC) released new rules regarding the taxation of cryptocurrency for residents of the UK. Regulatory users have until a phased deadline of early 2026 to achieve compliance. These changes require extensive personal identifying information for crypto transactions and carry potential civil penalties in the millions for failure to comply. The UK government has vowed to place the entire crypto market under the purview of financial regulation.
Beginning January 2026, users will need to submit a wealth of personally identifiable information to their cryptocurrency service provider, even for the most mundane transactions involving virtual currencies. This encompasses purchasing, selling, exchanging, or transferring digital assets in cryptocurrency. Moving forward HMRC clearly state that if companies aren’t compliant with these new regulations they will face severe financial punishment.
Users can be fined for not giving their complete data, with individual fines of up to $407 for noncompliance. Cryptocurrency profits exceeding $4,079 per year are taxable in the UK, with tax rates depending on the individual’s income level. Giving false information, or not giving the information you need to provide, is subject to a fine of up to $407.
Crypto firms will still need to gather and verify identifying information for each and every customer. If not, they risk being fined up to $407 for every user without full Know-Your-Customer (KYC) information. According to just one UK government projection, total fines could be as high as $543.9 million if there’s massive non-compliance. HMRC has asked individuals who trade in crypto-assets to divulge identifying personal information.
The UK's effort to regulate the crypto market aligns with similar initiatives worldwide to enhance transparency and combat financial crime. The UK isn’t the only one trying to crack down on identity checks in crypto.
