UK encryption tax rules pushing investors to leave the country star-news.press/wp

The UK’s approach to imposing taxes on digital assets increasingly causes friction between encryption users. The main issues stem from how to classify tax authority, HMRC, and Crypto classification and impose what many see as stressful requirements for transactions to record personal data detection.

In Beincrypto, Susie Violet Ward, CEO of Bitcoin Policy UK, warned that the country’s current tax and organizational policies threaten the encryption industry. As you can see, without urgent reforms, these rules are constantly risked unlike the growth of industry in the United Kingdom.

Cracks puzzle

In the United Kingdom, coded currency users express serious concerns about the organizational environment, referring to issues such as excessive organization, disposal of banking, and the general lack of clarity. At the heart of these problems, the country’s tax authorities view and treat digital assets, which many argue with the growth of the industry.

The challenges facing encryption users in the UK are many, starting from the incorrect classification of digital assets and strict caps of capital profit allowance to significant special concerns.

Bitcoin division against “encryption”

For many defenders, the primary defect in the UK’s approach is the lack of clear discrimination between Bitcoin and thousands of other encryption origins.

While the FCA has a symbolic classification, it is widely classified by bitcoin as a “exchange code”, by applying a comprehensive organizational lens to all cryptocurrencies.

Ward that this approach that suits everyone is misleading because Bitcoin and other encryption projects are essential.

“It is a fully decentralized protocol that deals with the maximum market by 60 % of the total encryption industry, and others are VC technologies. It is not even from the same thing. However, they all give the same risks under FCA, and you cannot work this way, it causes confusion.”

This primary separation in classification has a very real impact on how the government treats every tax purposes.

The problem of “swap” and the burden of tracking

For UK investors, a major tax case stems from how the tax authorities classify digital assets. The UK’s tax body, HMRC, does not see cryptocurrencies as money. Instead, he treats them as property or assets, such as stocks or jewelry.

This main distinction is an important result: every time the user gets rid of the original, it is considered disposal, which can lead to a tax event. This event is particularly exhausting with encryption bodies, which includes the exchange of an encrypted currency to another.

Although the user may see this as one simple trade, HMRC is seen as two separate tax events. One “sells” actually one of the assets and then “buys” one of the new assets.

Even without forgetting one of the hands of changing the money, one must calculate a profit or lose the capital on the origin that is disposed of, using its value in British pounds at that moment. This rule also obliges active merchants to keep a detailed record for each transaction they do.

“If every trade or swap raises a taxable event, this makes the records very difficult. So try to determine your tax bill on that becomes very stressful, expensive and unclear,” Ward told Beincrypto.

Meanwhile, tax -exempt profit allowances for investors in the UK continues to shrink, which requires them to pay taxes less than their gains from previous years.

Decrease in capital gains

Besides the complications of Crypto Saps, the UK’s tax policy creates another obstacle to investors: CGT. The term refers to a person’s profit from selling assets, including encryption, before paying the tax.

In a move that brought strong criticism from the encryption advocates, the UK government systematically cut this creator for three years. It moved from 12300 pounds in 2022 to 6000 pounds for 2023, to 3000 pounds per year.

Ward that this reduction is a major inhibitor for anyone looking to invest. From an economic point of view, it believes that politics leads to counterproductive results.

“The more people’s taxes, the more people you mean, the more you get in the taxes. It has actually finished getting a less tax … because as soon as you reach a certain amount, people will start leaving. They will start protecting their wealth, and this is exactly what happens,” she explained.

Ward added that the United Kingdom already sees high value individuals and successful investors move to more tax -friendly judicial states such as the United Arab Emirates, the United States or Singapore.

Ultimately, this tax reduction creates a financial burden on large and young investors and a defective economic strategy that can eventually harm the long -term financial health in the United Kingdom.

The recent recent changes in the UK Tax Authority’s approach to encryption tax raised significant concerns about the privacy of data and security.

Privacy, monitoring and “honey bowl” from data

Starting in January 2026, the UK encryption platforms will be needed to share user data with HMRC, a shift that causes anxiety among many in the encryption community due to great privacy concerns.

This new requirement is part of the UK’s adoption of the framework of reporting Cryptoasset (Carf), a global standard developed by the Organization for Economic Cooperation and Development (OECD) to combat tax evasion.

Previously, the UK’s approach to tax compliance with encryption was mainly dependent on voluntary detection of individuals. Under the new Carf frame, the responsibility for reporting is turned into the same platforms, providing HMRC a direct and comprehensive flow of transactions.

Next year, Crypto service providers must collect and report their user identity data and comprehensive transactions. Details include the names, dates of birth, addresses, and tax identification numbers, which HMRC will use in the mutual reference with tax declarations for self -evaluation and determining possible compliance.

“(Users) should be really terrified. HMRC had only two months ago hacking 100,000 users that can now be bought on the dark Internet,” referring to the HMRC hunting attack in HMRC in June 2025.

In this event, fraudsters claimed 47 million pounds in the payment of taxes from HMRC. They have achieved this using personal data to create or kidnap about 100,000 HMRC accounts online.

According to Est, this anxiety is not just a theory.

“This will be a harm that comes to the real world. We have already started seeing … kidnappings, and cut fingers. This results in physical harm already. They want to know everything about us, but they will not do anything to really protect our data,” she said.

CARF Working Framework is not the only current rule that will increase the data of the data between the encrypted taxpayers.

FATF Travel Base: Displaced effort?

To align the encryption sector with traditional financing, the UK government implemented the FATF Book of Business Business Basement for encryption companies in September 2023. This step responded directly to the global standards set by the FATF, which is the international body that sets the anti -money laundering and administrative financing measurements.

Al Qaeda imposes that these companies gather and share personal information about messengers and beneficiaries of encryption transfers. The motivation came after FATF has a growing risk in the encryption sector due to its borrowed nature and the ease of transfers across the border.

The UK’s commitment to this standard was aimed at showing its commitment to international standards. Unlike some countries, the UK has no minimum transactions, which means that the base applies to all encryption processes regardless of value.

The FAFT Base is established for the first time for the cosmopolisan transfers, these risks were not removed in the traditional banking system. While the base adds a layer of transparency, criminals continued to find ways to move the illegal money, indicating that it is not a guaranteed solution.

A challenge of the logic of applying this rule to encryption, arguing that its effectiveness in traditional financing is doubtful.

“We know that illegal activities occur in the traditional system and FATF did not stop anything there … if they cannot protect us and this leads to material damage and does not actually lead to any positive net to the industry, in order to finance, in order to launder money, for illegal activities, etc., you must ask yourself, why do they do that?” ”

With a lot at stake, the debate on the UK encryption policies in the UK enters a critical new stage.

A call to change

Issue issues from an organizational framework are widely seen as not suitable for unique characteristics of decentralized technologies. These policies are not just bureaucratic obstacles. In the view of many encryption advocates, they are active in deterring investment, innovation and talent from the United Kingdom.

Meanwhile, the number of encryption users throughout the UK continues to grow. recently Data From FCA indicates that about 12 % of adults in the UK now own or own Crypto, with a significant increase of only 4 % in 2021.

As the adoption continues to increase, the conversation surrounding how to impose encryption taxes will undoubtedly be condensed.