UK Crypto Investors May Still Owe Taxes Despite No HMRC Warning Letter

UK crypto buyers may face tax payments even when they haven’t obtained warning letters from HM Income & Customs (HMRC), because the company steps up efforts to trace undeclared digital asset revenue.

Final week, the Monetary Occasions revealed that HMRC issued nearly 65,000 “nudge letters” within the 2024–25 tax 12 months, greater than double the quantity despatched the 12 months earlier than. The letters urge buyers to overview their filings and voluntarily declare crypto-related beneficial properties earlier than potential audits start.

Nevertheless, tax specialists warn that the company’s rising use of trade information and worldwide reporting agreements implies that buyers who haven’t obtained a letter shouldn’t assume they’re within the clear.

“Not reporting cryptocurrency transactions to HMRC is illegitimate, no matter whether or not you’ve been contacted but,” Andrew Duca, founding father of the crypto tax platform Awaken Tax, informed Cointelegraph. “So even when you haven’t obtained a warning letter, the truth that HMRC has issued so many this 12 months ought to function a wake-up name,” he added.

Duca famous that HMRC sometimes identifies noncompliance by evaluating financial institution data, trade information, and self-assessment varieties. Discrepancies, similar to undeclared deposits or transfers, can set off letters or formal investigations.

Increased earners and buyers with giant onchain portfolios are particularly more likely to be focused as information sharing between exchanges and regulators will increase, he stated.

Associated: How to file crypto taxes in 2025 (US, UK, Germany guide)

HMRC tightens crypto oversight

Exchanges working within the UK and people serving UK prospects overseas are legally required to offer transaction information to HMRC. With the OECD’s Crypto-Asset Reporting Framework (CARF) set to take impact in 2026, the company will achieve automated entry to data from world buying and selling platforms.

“It’s much better to be proactive and report in your exercise now, fairly than anticipate HMRC to tug you up on it,” Duca stated.

He famous that crypto exercise turns into taxable not solely when digital property are transformed to kilos, but additionally once they’re swapped between tokens or generate revenue by staking, airdrops, or yield farming. Solely purchases made with fiat foreign money or transfers between private wallets are exempt.

To calculate beneficial properties, HMRC applies a three-tier “spooling” technique. This consists of assessing same-day trades first, then transactions inside a 30-day window, and eventually utilizing a mean price for older purchases. For lively merchants, this course of can grow to be extremely complicated, and Duca recommends utilizing specialist tax software program designed for crypto reporting.

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What to do if contacted

Duca stated buyers who obtain an HMRC letter are finest suggested to hunt skilled recommendation instantly. Specialist accountants may also help put together correct transaction experiences and negotiate with the tax workplace if underpayment is found. Failure to reply might result in penalties or additional investigation.

“Utilizing crypto tax software program will even provide help to to generate correct experiences of all of your exercise as precisely and effectively as doable,” Duca stated. “Lastly, you might want to be ready to pay. If you happen to owe taxes, you’ll have to settle them.”

Duca added that decentralized exchanges (DEXs) and cold wallets usually are not exempt from HMRC reporting necessities. “You’re legally required to report on all DEX transactions, chilly pockets exercise and scorching pockets transfers,” he stated.

In the meantime, within the US, senators are exploring updates to crypto tax policy, together with exempting small transactions from taxation and clarifying how staking rewards are handled.