HMRC steps up cryptoasset compliance drive with 81,000 warning letters

HM Revenue & Customs (HMRC) is significantly increasing its scrutiny of cryptoasset investors, with around 81,000 warning letters sent to individuals suspected of underpaying tax on gains on such assets in the 12 months to 5 April 2026.

The latest figures represent a 25% increase on the previous year, when around 65,000 letters were issued. The number of letters has increased significantly in recent years, highlighting HMRC’s growing focus on cryptoasset tax compliance.

With new international reporting requirements now coming into effect, HMRC is also gaining greater access to information about cryptoasset transactions. For anyone who buys, sells, exchanges or receives cryptocurrency or other cryptoassets, it is increasingly important to understand their UK tax obligations.

What are HMRC’s crypto tax warning letters?

HMRC’s crypto tax warning letters, sometimes referred to as “nudge letters”, are sent to individuals where HMRC believes there may be undeclared or underpaid tax relating to crypto asset activity.

Receiving a letter does not necessarily mean that HMRC has opened a formal tax investigation. However, it provides an opportunity for the taxpayer to review their tax position and correct any errors or omissions.

HMRC can obtain information about cryptoasset transactions from UK and overseas exchanges and a variety of other sources. Increasing international reporting requirements are expected to continue to expand information available to HMRC over time. This means taxpayers should not assume that transactions carried out through a cryptocurrency platform will remain outside HMRC’s view.

If you receive a letter from HMRC, it is important not to ignore it. The appropriate response will depend on your individual circumstances and whether any income or gains have previously been reported.

Do you pay tax on cryptoasset transactions in the UK?

Simply buying and holding cryptocurrency as an investment does not normally create an immediate UK tax charge. However, tax can arise when cryptoassets are disposed of and a gain is made.

For Capital Gains Tax purposes, a disposal can include:
• selling cryptocurrency for pounds or another currency;
• exchanging one crypto asset for another;
• using cryptoassets to purchase goods or services; or
• giving cryptoassets to someone other than a spouse or civil partner.

This means that an investor does not necessarily need to withdraw traditional currency from a cryptoexchange for a taxable event to occur.

For example, exchanging Bitcoin for another cryptocurrency can constitute a disposal, even though no pounds have been received.

Investors who have made numerous transactions may therefore need to calculate the gain or loss arising from each disposal and consider how these affect their overall Capital Gains Tax position.

Cryptoincome can also be taxable

Capital Gains Tax is not the only tax that can apply to cryptoassets.

Depending on the circumstances, Income Tax may apply to cryptoassets received through activities such as mining, staking, lending and certain types of airdrop. The tax treatment will depend on the nature of the activity and the specific facts involved.

Cryptoassets received as employment income or as part of a remuneration package may be subject to Income Tax and National Insurance contributions.

The tax treatment can become particularly complex where an individual both invests in cryptoassets and earns income from crypto-related activities. The nature of the activity and the individual circumstances in which the cryptoassets are received will determine the appropriate tax treatment.

It is also important to remember that receiving cryptoassets as income and subsequently disposing of those assets can create separate tax considerations.

Why is HMRC increasing its focus on crypto?

HMRC’s increased compliance activity coincides with the introduction of the Cryptoasset Reporting Framework (CARF).

CARF is an international reporting framework designed to improve the exchange of information about cryptoasset transactions between tax authorities.

Under the UK implementation of CARF cryptoasset service providers that fall within the scope of the reporting rules are required to undertake customer due diligence and collect specified information relating to customers and transactions.

The first reporting period covers transactions taking place during 2026, with the first reports due to HMRC between 1 January and 31 May 2027.

This means HMRC’s ability to identify cryptoasset activity is expected to increase further.

For investors, this makes accurate record keeping and reporting increasingly important.

What should crypto investors do?

If you hold or have previously traded cryptoassets, it is worth reviewing your tax position and records.

You may need to consider if Self Assessment registration is required, many crypto investors are unaware they may need to file a tax return.

Keep detailed records

Keep records of cryptoasset purchases, sales, exchanges, transfers, fees and the value of transactions in pounds sterling.

This can be particularly important for individuals who have made a large number of transactions across different platforms.

Review previous tax returns

If you have previously disposed of cryptoassets without reporting the resulting gains or losses, review your position to establish whether a correction or disclosure is required.

Don’t overlook crypto-to-crypto exchanges

Exchanging one cryptocurrency for another can be a taxable disposal for Capital Gains Tax purposes.

This is one of the areas that can easily be overlooked, particularly where investors do not consider an exchange between two cryptocurrencies to be a “sale”.

Consider crypto-related income

If you have received cryptocurrency through mining, staking, lending, airdrops or other activities, consider whether the amounts received should have been reported as income.

Respond to HMRC correspondence

If you receive a crypto tax warning letter from HMRC, don’t ignore it.

Review the information HMRC has referred to and consider whether your previous tax returns accurately reflect your cryptoasset activity. Professional advice may be appropriate where the position is complex or previous returns need to be corrected.

The importance of getting your crypto tax position right

The increase to around 81,000 HMRC warning letters demonstrates the growing focus on crypto asset tax compliance.

With CARF now being implemented and the first information reports expected in 2027, HMRC is expected to have increasingly detailed information about cryptoasset transactions.

For investors who have maintained appropriate records and reported their transactions correctly, they should be confident their current approach is adequate. For those who may have overlooked taxable gains or income, however, now is a good time to review their position.

The taxation of Cryptoasset activity can be complicated, particularly where there have been multiple transactions, transfers between exchanges or a mixture of investment and income-generating activities.

How Moore South can help

If you are unsure whether your cryptoasset activity is taxable, need help calculating cryptoasset gains or have received a warning letter from HMRC, our tax team can help you understand your position and determine what action may be required.

Get in touch with Moore South today to discuss your cryptoasset tax position and make sure you are prepared for increased HMRC scrutiny.