HMRC sends 81,000 crypto tax warning letters

HM Revenue and Customs sent 81,000 nudge letters to cryptocurrency investors in the past 12 months over suspected unpaid tax, up 25% from about 65,000 the year before, according to figures obtained by accountancy group UHY Hacker Young via a Freedom of Information request released Aug. 20. The letters invite recipients to disclose unpaid tax before HMRC opens a formal investigation. The total continues a sharp rise from 27,714 letters in the 2023-24 tax year.

The letters target a range of crypto activity. HMRC guidance states that selling tokens for pounds, swapping one cryptocurrency for another, spending crypto on goods or services, and gifting tokens can be treated as disposals for capital gains tax. Income from lending, staking or other crypto-based services may be taxed as income depending on the nature of the transaction and the taxpayer’s circumstances. Taxable amounts depend on acquisition costs, disposal value and any applicable allowances.

Neela Chauhan, a partner at UHY Hacker Young, wrote that some investors misunderstand the tax rules or assume authorities cannot see their transactions, and that some believe using overseas exchanges removes UK tax obligations. UK residents are generally taxed on worldwide income and gains, including those generated through offshore platforms.

HMRC’s visibility into cross-border crypto activity is set to increase under the Cryptoasset Reporting Framework. Crypto service providers in the UK must collect identifying information and transaction summaries. Their first reports, covering activity from Jan. 1 to Dec. 31, 2026, are due to HMRC between Jan. 1 and May 31, 2027. The framework also requires providers in participating jurisdictions to report information on users who are tax residents elsewhere, which will allow international exchange of data on UK residents using overseas platforms.

UHY expects 52 jurisdictions to supply data in 2027, with a further 15 joining in 2028. In April, the Financial Conduct Authority, HMRC and regional law enforcement carried out raids on eight suspected illegal peer-to-peer trading sites; evidence gathered during those inspections has supported several ongoing criminal investigations.

Tax rules for certain decentralized finance arrangements are due to change in April 2027. Under planned reforms, qualifying crypto loans and automated market-making arrangements would be treated on a no-gain, no-loss basis until an economic disposal occurs. HMRC estimates the revised treatment will affect around 700,000 people.

HMRC guidance advises taxpayers who hold crypto assets and are tax residents in the UK to review how disposals, swaps, lending and other activities are treated for tax purposes and to consider reporting liabilities when contacted by the tax authority.