HMRC has significantly increased the number of letters sent to individuals it believes may owe tax on cryptocurrency activity.

Growing warning signs for crypto investors

In the 2024 to 2025 tax year, the tax authority issued almost sixty-five thousand warning notices to potential non-compliant investors. This represents a sharp rise from just over twenty-seven thousand in the previous year and highlights HMRC’s more assertive approach to closing the tax gap on digital assets.

These early-stage notices, known as nudge letters, are designed to prompt taxpayers to review their affairs, declare unpaid tax and correct any errors in Capital Gains Tax before HMRC begins a formal enquiry.

Why HMRC is tightening its focus

With around seven million adults now holding crypto assets in the UK and cryptocurrency valuations rising sharply, the potential for undeclared taxable gains is considerable.

Many people don’t understand that their tax affairs need reviewing, and they misunderstand or overlook their obligations when dealing with crypto assets and crypto transactions. Even switching from one token to another constitutes a disposal for tax purposes and can create a chargeable gain.

HMRC has also been expanding its access to data from crypto exchanges, giving it greater insight into investors’ transactions and compliance. As this data-sharing network grows, HMRC is expected to apply even closer scrutiny to individuals trading in digital assets.

From 2026, this oversight will increase further as new international reporting rules under the Crypto Assets Reporting Framework come into force, requiring more exchanges to automatically provide information.

Understanding your tax position on cryptocurrency

Anyone selling or disposing of cryptocurrency may be liable for Capital Gains Tax if their profit exceeds the annual allowance, currently £ 3,000. In some circumstances, HMRC may treat frequent or organised crypto activity as trading, which could bring income tax and national insurance into play.

A disposal for tax purposes includes selling tokens, exchanging tokens from one cryptocurrency for another, using crypto to pay for goods or services, or giving tokens away except to a spouse or civil partner.

Accurate record-keeping and tax reporting are essential for UK crypto holders, as individuals are required to report gains and losses on their self-assessment tax return.

Why professional advice matters

This rise in HMRC activity was inevitable given the rapid growth in the crypto market. While some investors will have made substantial profits, others will have suffered significant losses. In both cases, maintaining comprehensive records is vital as losses can often be offset against gains.

Anyone who has traded or exchanged crypto assets and is unsure of their compliance position on these cryptoasset transactions is encouraged to seek professional advice. Voluntary disclosures made before HMRC contacts an individual typically lead to lower penalties and a smoother resolution. Failing to make a disclosure to HMRC or providing incorrect information could lead to higher penalties.

If you need more advice on tax obligations on crypto assets, reporting requirements, how to make a voluntary disclosure and how to stay compliant in future, contact the Barnes Roffe tax team today.

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