PolicyLens

Methodology note

Cut crypto CGT to 10%: calculation note

Assumptions behind the Cut crypto CGT to 10% scenario. Implementation detail is incomplete, so uncertainty is explicit.

View main policy page: Cut crypto CGT to 10%

Central fiscal result

+£0.5bn - Net fiscal impact in 2027-28

Low case: -£1.0bn. High case: +£5.0bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

  • Crypto capital gains are taxed at 10%.
  • A two-year sandbox and banking access rules are introduced.
  • Tax payments in crypto are operationally enabled.
  • Bitcoin reserve size is unspecified and not central.

Affected population

  • Affected units are crypto investors, exchanges, banks and HMRC.
  • Reform says about 7m UK residents hold crypto.
  • High-income investors likely account for much taxable gain.
  • Tax administrators face valuation and compliance risks.

Gross impact

  • Central case assumes lower CGT loses more than compliance gains.
  • Low case assumes declarations and onshore activity increase receipts.
  • High case includes reserve losses or large tax-base erosion.
  • Sandbox administration is small.

Fiscal build-up, central case

  • Crypto CGT rate cut: +£0.8bn
  • Higher declarations and activity: -£0.3bn
  • Regulation and HMRC systems: +£0.1bn
  • Bitcoin reserve central effect: -£0.1bn

Central net impact: +£0.5bn in 2027-28.

Behaviour and pass-through

  • Low case assumes lower rates bring gains onshore and improve compliance.
  • Central case assumes modest compliance gain and some revenue loss.
  • High case assumes tax-base erosion and adverse reserve valuation.
  • Crypto volatility dominates short-run receipts.

Phasing

  • 2026-27: +£0.2bn. Preparation or partial implementation.
  • 2027-28: +£0.5bn. Main scenario year.
  • 2028-29: +£0.8bn. Behaviour and pass-through develop.
  • 2029-30: +£0.8bn. Steady-state uncertainty persists.

Main source groups

  • Halaburda, Haeringer, Gans and Gandal, "The Microeconomics of Cryptocurrencies" (Journal of Economic Literature, 2022): The literature emphasises volatility, network effects, mining incentives and limited fundamental anchors in crypto markets; supports high uncertainty around tax-base and reserve-risk assumptions.
  • Gandal and Halaburda, "Network effects in digital assets" (Games, 2016): Digital-currency competition depends on network effects and expectations, not only statutory tax treatment; warns against assuming tax cuts alone create a crypto hub.
  • Reform UK, "Digital Assets and Cryptocurrency Bill" (2025): The bill proposes 10% crypto CGT, a sandbox, banking access, tax payment in crypto and a Bitcoin reserve; defines the modelled package.
  • HM Revenue and Customs, "Direct effects of illustrative tax changes" (2026): HMRC ready-reckoners show capital-gains-tax responses can be non-linear and behaviour-sensitive; supports a wide range.
  • Budish, "Trust at Scale: The Economic Limits of Cryptocurrencies and Blockchains" (Quarterly Journal of Economics, 2025): Proof-of-work blockchain security has economic limits linked to attack incentives and resource costs; relevant to treating a public bitcoin reserve as risky, not neutral.
  • Reform UK, "Our Policies" (2026): Used to define the pledge wording, policy scope and implementation scenario being modelled.