Cryptocurrency Taxation for US Expats in the UK: Latest HMRC & IRS Updates
As cryptocurrency continues to evolve from a niche investment to a mainstream financial asset, regulatory bodies across the world are tightening their grip on how it is reported and taxed. For US citizens living in the UK, understanding the rules around crypto taxation is particularly important, as they are subject to both HMRC and IRS reporting obligations. With tax authorities sharing more data than ever before, non-compliance is no longer an option. The team at Xerxes Associates LLP specialises in helping American expatriates navigate this complex cross-border tax environment, ensuring their crypto portfolios remain compliant on both sides of the Atlantic.
Cryptocurrency is treated differently in the US and UK, but both tax systems agree on one thing — it is not “currency” in the traditional sense. The HMRC classifies digital assets as property, meaning capital gains tax applies whenever you sell, trade, or otherwise dispose of your crypto. This includes converting tokens into fiat, swapping one coin for another, or even using cryptocurrency to pay for goods and services. Each of these events can trigger a taxable gain or loss based on the market value at the time of the transaction.
For US taxpayers, the situation is even more complex. Under IRS rules, American citizens must report their worldwide income and capital gains regardless of where they live. This means that crypto gains realised while residing in the UK must be reported both to HMRC and the IRS. The United States has a unique taxation model based on citizenship rather than residency, which can lead to dual reporting requirements for expats. However, relief mechanisms such as the Foreign Earned Income Exclusion (FEIE), Foreign Tax Credit (FTC), and the US-UK Double Taxation Treaty can help to offset or eliminate double taxation when managed correctly.
Recent updates from both tax authorities highlight the growing seriousness with which crypto is being treated. The IRS has included a dedicated question about digital assets on Form 1040, and exchanges are now required to issue information reports under expanded 1099-K regulations. Meanwhile, the UK has introduced enhanced compliance measures under the Cryptoasset Reporting Framework (CARF), aligning with the OECD’s global standards for tax transparency. Beginning in 2026, UK-based exchanges will be required to share user data automatically with tax authorities worldwide, including the United States.
Given these developments, it is crucial for US expats in the UK to maintain accurate records of all crypto transactions. This includes the date of purchase, sale value, exchange fees, and wallet addresses. HMRC expects clear documentation, and the IRS has made it clear that failure to disclose crypto activity could be treated as wilful tax evasion.
Xerxes Associates LLP advises clients to take a proactive approach by conducting an annual crypto tax review. By consolidating data across wallets and exchanges, calculating cost basis accurately, and applying available treaty reliefs, expats can stay compliant while minimising unnecessary tax liabilities. The firm’s dual-qualified tax professionals are experienced in preparing both US and UK returns, ensuring that every filing reflects consistent and defensible information.
In 2025, both HMRC and the IRS are investing in blockchain analytics tools to identify unreported assets. This marks a new phase of cross-border cooperation and enforcement. For Americans living in London or elsewhere in the UK, this means transparency is not optional — it is a legal necessity. Working with a firm that understands both systems is no longer just a convenience, but a compliance safeguard.
To learn more about how Xerxes Associates LLP assists US citizens in the UK with cryptocurrency taxation, visit www.xerxesassociatesllp.com and schedule a consultation with one of their cross-border tax specialists.
