HMRC increases scrutiny with 81,000 crypto tax warning letters

HM Revenue and Customs (HMRC) has significantly increased its scrutiny of cryptocurrency investors, issuing 81,000 ‘nudge letters’ over the past 12 months. This represents a 25% increase from the approximately 65,000 letters sent in the previous year and a sharp rise from the 27,714 letters issued during the 2023-24 tax year.

These letters serve as warnings, allowing individuals to disclose unpaid taxes before the agency initiates formal investigations. According to UHY Hacker Young, noncompliance often stems from investors misunderstanding complex regulations or incorrectly assuming that using overseas exchanges exempts them from UK tax obligations.

Under the UK framework, taxable events include not only selling crypto for fiat currency but also exchanging one digital asset for another, spending tokens on goods or services, or gifting assets. Additionally, income from activities such as staking or lending may be subject to separate income tax rules. Looking ahead, expanded international reporting is expected to provide HMRC with greater visibility into offshore transactions starting in 2027.