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

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

Final week, the Monetary Occasions revealed that HMRC issued almost 65,000 “nudge letters” within the 2024–25 tax yr, greater than double the quantity despatched the yr earlier than. The letters urge buyers to evaluation their filings and voluntarily declare crypto-related good points 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 acquired a letter shouldn’t assume they’re within the clear.

“Not reporting cryptocurrency transactions to HMRC is unlawful, 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 acquired a warning letter, the truth that HMRC has issued so many this yr 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, equivalent to undeclared deposits or transfers, can set off letters or formal investigations.

Greater earners and buyers with massive onchain portfolios are particularly prone to be focused as information sharing between exchanges and regulators will increase, he mentioned.

Associated: Methods to file crypto taxes in 2025 (US, UK, Germany information)

HMRC tightens crypto oversight

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

“It’s much better to be proactive and report in your exercise now, moderately than look forward to HMRC to tug you up on it,” Duca mentioned.

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

To calculate good points, HMRC applies a three-tier “spooling” methodology. This consists of assessing same-day trades first, then transactions inside a 30-day window, and at last utilizing a median value for older purchases. For energetic merchants, this course of can turn into extremely advanced, and Duca recommends utilizing specialist tax software program designed for crypto reporting.

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What to do if contacted

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

“Utilizing crypto tax software program will even enable you to to generate correct experiences of all of your exercise as precisely and effectively as attainable,” Duca mentioned. “Lastly, it’s essential be ready to pay. If you happen to owe taxes, you’ll must settle them.”

Duca added that decentralized exchanges (DEXs) and chilly wallets should not exempt from HMRC reporting necessities. “You might be legally required to report on all DEX transactions, chilly pockets exercise and scorching pockets transfers,” he mentioned.

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