Crypto exchanges operating in the United Kingdom will be required to collect detailed transaction data from all UK-based users starting January 1, 2026. Under the new HM Revenue & Customs (HMRC) rules, platforms must keep a complete record of user activity and transmit it to the tax office in 2027. The move aligns the UK with the OECD’s Crypto-Asset Reporting Framework, which is already being adopted in the EU, Canada, Australia, Japan and South Korea.
Seb Maley, CEO of tax insurance provider Qdos, told the Financial Times that once exchanges begin recording this data, “the tax office will be able to cross-check tax returns against the data they’ve received.” He added that users effectively have until the end of 2026 to get their affairs in order to avoid penalties. The change brings crypto reporting closer to the standards applied to traditional financial accounts.
For exchanges, classified as “Reporting Cryptoasset Service Providers,” the obligation applies across all wallet activity, including deposits, withdrawals, trading, transfers and disposals. Non-compliant platforms can face enforcement.
Investor Takeaway
Once HMRC receives exchange data in 2027, undeclared crypto gains will become far easier for the tax office to detect. UK retail and professional users may face heavier scrutiny than in previous cycles.
Why Is the UK Pairing Strict Reporting Rules With a New DeFi Tax Model?
Alongside the reporting overhaul, HMRC is advancing a proposal that could ease the tax burden on DeFi users. The draft framework supports a “no gain, no loss” (NGNL) approach for crypto lending and liquidity pool arrangements, deferring capital gains tax until a real disposal occurs. Under current rules, depositing tokens into a lending protocol or AMM can be treated as a taxable disposal even when users have not sold anything.
HMRC’s proposal would stop treating these deposits as disposals, removing a long-standing obstacle for DeFi participants. Aave founder Stani Kulechov called the development “a major win for U.K. DeFi users,” adding on X that he hopes the approach will be reflected in future legislation. In practice, this would mean users are not taxed on initial deposits into protocols, but gains or losses realized upon withdrawal would still fall under capital gains rules. Multi-token arrangements would be treated the same way: receiving more tokens back than deposited creates a taxable gain; receiving fewer creates a loss.
How Will DeFi Users Be Affected Under the Proposed Rules?
The proposal brings tax treatment closer to how DeFi activity actually works, reducing the mismatch between protocol mechanics and tax outcomes. But it does not eliminate all taxable triggers. Buying ETH, converting it to WETH or later cashing out gains from protocol earnings will still incur tax. The draft excludes tokenized real-world assets and traditional securities from the NGNL definition, keeping the scope centered on DeFi-native tokens.
HMRC says it is still collecting input to refine the model, noting that 32 formal responses were received from groups including Aave, Binance, Deloitte and CryptoUK. Most respondents supported the shift, though some warned that applying repo-style rules or treating every token movement as taxable would make compliance unmanageable for retail users. One issue remains unresolved: users may still be required to report large volumes of transactions even if many are no longer disposals. HMRC said it is working with software providers to assess the reporting load.
Investor Takeaway
If adopted, NGNL could reduce surprise tax bills for users who rely on lending protocols and AMMs. The relief is narrow, though — taxable events still apply to asset purchases, wrapping, and realized gains.
What Comes Next for UK Crypto Regulation?
The UK government has not set a timeline for formal legislation, but HMRC says it will continue discussions with industry groups as it weighs the case for turning the proposals into law. The country’s twin-track approach — tighter reporting and a more workable DeFi tax model — places it among the first major jurisdictions attempting to modernize tax rules while expanding oversight.
If the rules proceed, 2026 and 2027 will become transition years for both platforms and users. Exchanges must upgrade compliance systems, while UK traders and investors may need to revisit years of wallet activity to prepare for expanded reporting. The combination of mandatory data collection and a clearer DeFi tax framework sets the stage for a more structured relationship between HMRC and the crypto sector. Once the full reporting regime lands, the margin for informal or incomplete declarations will shrink sharply.