Dear Reader,
Stablecoins and the UK’s Crypto Tax Headache: Is Simplification Finally Coming?
HMRC’s recent call for evidence on the taxation of stablecoins highlights a wider problem with the UK’s crypto tax framework: the rules may be clear in principle, but they are difficult to apply in practice. For individuals, the main challenge is tracking every disposal, including crypto-to-crypto swaps and stablecoin transactions, and calculating potential Capital Gains Tax even where there may be little or no real economic gain. Responses from professional bodies such as CIOT and ICAEW suggest practical reforms, including no-gain/no-loss treatment or exemptions for certain stablecoin transactions, which could reduce unnecessary compliance burdens. HMRC has shown some willingness to listen through earlier DeFi consultations, but whether these recommendations will translate into meaningful simplification remains to be seen.
HMRC’s recent call for evidence (https://www.gov.uk/government/calls-for-evidence/cryptoasset-taxation-stablecoins/taxation-of-stablecoins) on the taxation of stablecoins is notable because it admits, in fairly direct terms, that the present UK tax framework may not fit the way stablecoins are actually used. The call for evidence was published on 26 March 2026 and ran until 7 May 2026. It asks whether stablecoins, which are designed to maintain a stable value by reference to another asset such as fiat currency, should continue to be taxed in the same way as other cryptoassets. HMRC says it will publish details of the government’s next steps after the call for evidence.
For individuals, the core difficulty is not that HMRC has no rules. The difficulty is that the rules are demanding in practice. HMRC’s Cryptoassets Manual (https://www.gov.uk/hmrc-internal-manuals/cryptoassets-manual) states that, in the vast majority of cases, individuals hold cryptoassets as personal investments and are liable to Capital Gains Tax when they dispose of them. Income Tax and National Insurance can also apply where cryptoassets are received from employment, mining, transaction confirmation or airdrops, and trading treatment can apply in unusual cases where the individual is carrying on a financial trade in cryptoassets.
The Capital Gains Tax rules are the main source of friction. A “disposal” is not limited to cashing out into pounds. HMRC’s manual says it includes selling tokens for money, exchanging one token for another, using tokens to pay for goods or services, and giving tokens away, except for gifts to a spouse or civil partner. Moving tokens between wallets that the same individual beneficially owns is not a disposal, but the moment a token is swapped or spent, a CGT calculation may be required.
That creates a record-keeping problem. HMRC says the onus is on the individual to keep records for each cryptoasset transaction, including the type of cryptoasset, date, whether it was bought or sold, number of units, sterling value at the date of the transaction, cumulative holdings, bank statements and wallet addresses. Many crypto transactions also need to be valued in pounds sterling, and HMRC expects reasonable care and a consistent methodology where a transaction does not already have a sterling value.
Pooling adds another layer. Tokens of the same type are generally pooled for CGT purposes, with each type of token having its own pool and pooled allowable cost. That may simplify some calculations in theory, but it still requires accurate transaction histories across exchanges, wallets, DeFi platforms and tax years.
Stablecoins expose the awkwardness of this framework. HMRC currently says stablecoins are generally treated like other cryptoassets, are not generally considered money, and can still produce gains or losses, especially where a stablecoin is denominated in a non-sterling currency. HMRC also recognises that using stablecoins as payment will usually be a CGT disposal, requiring acquisition and disposal costs to be recorded. Even with sterling-denominated stablecoins, where gains may be negligible, transactions still need to be tracked and may need to be reported if aggregate proceeds exceed £50,000.
That is the practical complaint many individual users will recognise. A person may use USDT or USDC as a holding asset between trades, not because they are seeking a separate gain on the stablecoin itself, but because it functions like a crypto-market cash balance. Under the current approach, every movement in and out of that stablecoin may still matter for CGT. CIOT’s response (https://www.tax.org.uk/ref1681) puts the point sharply: using stablecoins as an entry and exit vehicle for other cryptoassets creates an additional layer of tax complexity, including the need to calculate capital gains or losses on each transaction and keep detailed records potentially for years. CIOT also notes that high-volume automated or platform-driven transactions may be low in value but high in administrative burden.
The professional-body responses broadly support simplification, although they differ in emphasis. CIOT’s main concern is that the existing CGT framework imposes significant administrative burdens where stablecoins are used repeatedly without any real-world economic gain or loss. It suggests that a no-gain/no-loss approach may be the most practical and workable reform, reducing administrative burden and the scope for expensive mistakes. CIOT also argues that any reform should include non-sterling stablecoins, because non-sterling stablecoins currently dominate actual market use.
ICAEW similarly argues (https://www.icaew.com/-/media/corporate/files/technical/icaew-representations/2026/icaew-rep-033-26-taxation-of-stablecoins.ashx) that the objective should be to remove transactions in relevant stablecoins from tax as far as possible unless real economic value is derived. It warns that many users do not distinguish, in practical terms, between holding a US dollar stablecoin and holding US dollars in a bank account, so wider retail use could lead people into a compliance problem without real awareness of the tax issue. ICAEW’s preferred personal-tax approach is to extend the debt exemption so that disposal of relevant stablecoins would result in neither a gain nor a loss, including for non-sterling stablecoins.
The hard part is scope. HMRC is considering whether some stablecoins should be treated as exempt assets or whether low-value reporting requirements should be relaxed. But it also needs to decide which stablecoins qualify: sterling only, non-sterling as well, UK-issued only, regulated only, asset-backed only, or a wider category. HMRC recognises that limiting reform to UK-issued qualifying stablecoins would initially have limited impact, because the market is not currently built around those instruments.
There is also a DeFi risk. ICAEW cautions that any exemption should be aligned with the developing no-gain/no-loss framework for DeFi, otherwise taxpayers could potentially convert volatile cryptoassets into exempt stablecoins through liquidity pools and crystallise gains in unintended ways. ICAEW therefore suggests targeting relief at genuine payment use cases, such as exchanging stablecoins for fiat currency or using them to buy goods and services, while keeping crypto-to-crypto swaps and liquidity-pool activity within the charge to tax.
The question is whether HMRC is likely to listen. The record is mixed but not hopeless. There is a relevant crypto-tax precedent: HMRC ran a call for evidence on DeFi lending and staking in 2022, followed by a consultation in 2023 (https://www.gov.uk/government/consultations/the-taxation-of-decentralised-finance-involving-the-lending-and-staking-of-cryptoassets/outcome/the-taxation-of-decentralised-finance-defi-involving-the-lending-and-staking-of-cryptoassets-summary-of-responses). In its 2025 summary of responses, HMRC said stakeholders wanted rules that better reflected economic reality and made compliance more straightforward. HMRC also said it had continued stakeholder engagement and was developing a potential no-gain/no-loss approach, including for automated market makers.
That does not mean every recommendation will be accepted. In the DeFi response, the government decided not currently to explore specific provisions changing the taxation of rewards from cryptoasset loans and liquidity pools, although it said it would keep the issue under review. This is a useful warning: calls for evidence can influence policy design, but they do not guarantee taxpayer-friendly reform.
The wider compliance direction is also not simply deregulatory. Under the Cryptoasset Reporting Framework, HMRC is moving towards greater information reporting by cryptoasset service providers. The government decided to extend CARF to domestic reporting on UK customers, with collection from 1 January 2026 and first reports for the 2026 calendar year due by 31 May 2027. That may improve HMRC visibility, but it does not itself simplify the CGT calculations individuals must perform.
The outlook for individuals is therefore cautiously positive, but only on stablecoin-specific simplification. HMRC has acknowledged the administrative burden; CIOT and ICAEW have supplied practical reform options; and the DeFi precedent shows that stakeholder responses can move HMRC’s thinking. But until legislation or revised rules are introduced, individuals should assume the current position remains: crypto-to-crypto swaps, stablecoin disposals, and stablecoin payments can all create CGT events, and the record-keeping burden remains with the taxpayer.
The best outcome would be a targeted reform that removes genuine stablecoin payment and cash-equivalent transactions from unnecessary CGT compliance, while preserving taxation where real economic gains are realised. That would not solve every crypto tax problem, but it would address one of the clearest mismatches in the current system: treating a payment-like digital asset as though every use of it were an investment disposal. Whether HMRC goes that far remains to be seen.
With warm regards,
Dmitry Zapol
Partner, international tax advisor, ADIT (Affiliate)
IFS Consultants, London
(www.ifsconsultants.com, dmitry@ifsconsultants.com)