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

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

Final week, the Monetary Instances revealed that HMRC issued nearly 65,000 “nudge letters” within the 2024–25 tax 12 months, greater than double the quantity despatched the 12 months earlier than. The letters urge traders to overview their filings and voluntarily declare crypto-related beneficial properties earlier than potential audits start.

Nonetheless, tax consultants warn that the company’s rising use of change knowledge and worldwide reporting agreements signifies that traders who haven’t obtained a letter shouldn’t assume they’re within the clear.

“Not reporting cryptocurrency transactions to HMRC is illegitimate, no matter whether or not you’ve been contacted but,” Andrew Duca, founding father of the crypto tax platform Awaken Tax, advised Cointelegraph. “So even in the event you haven’t obtained a warning letter, the truth that HMRC has issued so many this 12 months ought to function a wake-up name,” he added.

Duca famous that HMRC usually identifies noncompliance by evaluating financial institution data, change knowledge, and self-assessment varieties. Discrepancies, akin to undeclared deposits or transfers, can set off letters or formal investigations.

Increased earners and traders with giant onchain portfolios are particularly prone to be focused as knowledge sharing between exchanges and regulators will increase, he mentioned.

Associated: How to file crypto taxes in 2025 (US, UK, Germany guide)

HMRC tightens crypto oversight

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

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

He famous that crypto exercise turns into taxable not solely when digital belongings are transformed to kilos, but additionally once they’re swapped between tokens or generate earnings by staking, airdrops, or yield farming. Solely purchases made with fiat forex or transfers between private wallets are exempt.

To calculate beneficial properties, HMRC applies a three-tier “spooling” methodology. This consists of assessing same-day trades first, then transactions inside a 30-day window, and eventually utilizing a mean price for older purchases. For energetic merchants, this course of can grow to be extremely complicated, and Duca recommends utilizing specialist tax software program designed for crypto reporting.

Associated: New York State senator proposes tax on crypto mining energy use

What to do if contacted

Duca mentioned traders who obtain an HMRC letter are greatest suggested to hunt skilled recommendation instantly. Specialist accountants may help put together correct transaction studies 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 may even show you how to to generate correct studies of all of your exercise as precisely and effectively as potential,” Duca mentioned. “Lastly, it’s worthwhile to be ready to pay. When you owe taxes, you’ll must settle them.”

Duca added that decentralized exchanges (DEXs) and cold wallets should not exempt from HMRC reporting necessities. “You’re 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 policy, together with exempting small transactions from taxation and clarifying how staking rewards are handled.