Keep knowledgeable with free updates
Merely signal as much as the UK tax myFT Digest — delivered on to your inbox.
The UK tax authority doubled the variety of warning letters it despatched to crypto traders final yr, in an indication of a rising crackdown on unpaid capital features tax in digital property.
HM Income & Customs issued 65,000 letters to people suspected of owing tax on their cryptocurrency holdings within the 2024-25 tax yr. This was up from 27,700 within the earlier yr, knowledge launched beneath the Freedom of Info Act confirmed.
HMRC sends so-called “nudge letters” to folks it suspects of tax avoidance or evasion to “nudge” them into paying any lacking tax earlier than it opens a proper investigation.
The FOI revealed that previously 4 years, HMRC had despatched 8,329 letters to crypto traders in 2021-22; none in 2022-23; 27,713 in 2023-24 and 64,982 in 2024-25.
Tax advisers stated the potential quantity of unpaid tax might be important, as many people have been unaware of their obligations to pay tax when buying and selling in crypto property.
In line with the Monetary Conduct Authority, about 7mn UK adults maintain an estimated £12.9bn in crypto property, up from £7.8bn in 2022. In the meantime, bitcoin costs have risen by 315 per cent within the two years to October 6 2025.
“The tax guidelines surrounding crypto are fairly complicated and there’s now a quantity of people who find themselves buying and selling in crypto and never understanding that even when they transfer from one coin to a different it triggers capital features tax,” stated Neela Chauhan, accomplice at accountancy agency UHY Hacker Younger, which made the FOI request. “You do get some crypto merchants who’re against the thought of paying tax on their features.”
Nevertheless, Chauhan warned that HMRC now receives knowledge from many crypto exchanges straight, which helps it perceive whether or not individuals are complying with tax guidelines.
She added: “As HMRC features entry to extra knowledge, it can most likely intensify its tax crackdown on crypto traders. Those that haven’t declared their capital features will discover it more and more tough to keep away from the tax authority’s consideration.”
From 2026, HMRC will obtain automated knowledge from extra crypto exchanges by an OECD-led initiative, referred to as the Crypto-Belongings Reporting Framework.
Basically, anybody promoting or disposing of crypto property is topic to capital features tax on earnings above their annual allowance (at the moment £3,000). Nevertheless, in circumstances the place HMRC considers shopping for and promoting crypto property to be “buying and selling”, they are often topic to revenue tax and nationwide insurance coverage. People should hold data of their transactions and report and pay any tax due on an annual self-assessment return.
In addition to promoting a cryptocurrency, disposals embody exchanging one coin for one more, paying for a services or products utilizing cryptocurrency or making a gift of tokens to a different individual (until that individual is your partner or civil accomplice).
Andrew Park, tax investigations accomplice at accountants Value Bailey, stated: “What we’re beginning to see now was at all times inevitable and, if something, one wonders what took HMRC so lengthy.”
He added the UK tax workplace had been working carefully with different tax authorities, such because the IRS within the US, for a number of years to acquire and analyse change knowledge on crypto transaction.
“Many taxpayers may have realised very giant features and may have huge tax payments. Nevertheless, many others may have realised giant losses too and it will likely be essential for them to have retained or have entry to good data for them to have the ability to declare these losses and offset them in opposition to any features,” Park added.
He stated it was necessary for anybody who had purchased and bought crypto property — together with exchanging cryptocurrency for different property — to take pressing skilled recommendation if there’s a chance that they aren’t tax compliant.
“Unprompted disclosures appeal to a extra benign therapy from HMRC — together with decrease penalties.”
