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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 beneficial properties tax in digital belongings.
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 underneath 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 may very well be important, as many people had been unaware of their obligations to pay tax when buying and selling in crypto belongings.
In keeping with the Monetary Conduct Authority, about 7mn UK adults maintain an estimated £12.9bn in crypto belongings, 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 beneficial properties tax,” stated Neela Chauhan, associate at accountancy agency UHY Hacker Younger, which made the FOI request. “You do get some crypto merchants who’re against the concept of paying tax on their beneficial properties.”
Nonetheless, Chauhan warned that HMRC now receives knowledge from many crypto exchanges immediately, which helps it perceive whether or not individuals are complying with tax guidelines.
She added: “As HMRC beneficial properties entry to extra knowledge, it should most likely intensify its tax crackdown on crypto traders. Those that haven’t declared their capital beneficial properties will discover it more and more troublesome to keep away from the tax authority’s consideration.”
From 2026, HMRC will obtain computerized knowledge from extra crypto exchanges by way of an OECD-led initiative, referred to as the Crypto-Property Reporting Framework.
Usually, anybody promoting or disposing of crypto belongings is topic to capital beneficial properties tax on earnings above their annual allowance (presently £3,000). Nonetheless, in circumstances the place HMRC considers shopping for and promoting crypto belongings to be “buying and selling”, they are often topic to revenue tax and nationwide insurance coverage. People should preserve information of their transactions and report and pay any tax due on an annual self-assessment return.
In addition to promoting a cryptocurrency, disposals embrace exchanging one coin for one more, paying for a services or products utilizing cryptocurrency or gifting away tokens to a different individual (except that individual is your partner or civil associate).
Andrew Park, tax investigations associate at accountants Worth Bailey, stated: “What we’re beginning to see now was all the time inevitable and, if something, one wonders what took HMRC so lengthy.”
He added the UK tax workplace had been working intently with different tax authorities, such because the IRS within the US, for a number of years to acquire and analyse trade knowledge on crypto transaction.
“Many taxpayers may have realised very giant beneficial properties and may have massive tax payments. Nonetheless, many others may have realised giant losses too and it will likely be essential for them to have retained or have entry to good information for them to have the ability to declare these losses and offset them towards any beneficial properties,” Park added.
He stated it was essential for anybody who had purchased and bought crypto belongings — together with exchanging cryptocurrency for different belongings — to take pressing skilled recommendation if there’s a chance that they don’t seem to be tax compliant.
“Unprompted disclosures entice a extra benign remedy from HMRC — together with decrease penalties.”
