HMRC sends 81,000 crypto tax warning letters, up 25% in a year

HM Revenue and Customs has significantly increased its efforts to tackle suspected crypto tax evasion among UK investors, sending 81,000 warning letters over the past year to taxpayers believed to have underpaid tax on cryptocurrency investments.

The figure represents a 25 per cent increase from the 65,000 warning letters issued during the previous year, according to information obtained through a Freedom of Information request by accountancy firm UHY Hacker Young.

The warnings, which can be delivered through letters, text messages or notifications, are designed to encourage cryptocurrency holders to review their tax affairs and voluntarily disclose any unpaid liabilities before HMRC begins formal investigations.

The latest campaign comes as the tax authority prepares for a major expansion in the information available to it. From the end of May, HMRC is expected to receive detailed transaction data on UK residents from cryptocurrency exchanges operating across 52 jurisdictions.

That information is expected to include investors’ names, addresses, National Insurance numbers and full transaction records, giving HMRC significantly greater insight into cryptocurrency activity that may previously have been difficult for officials to trace.

The escalation means that investors who have failed to report taxable cryptocurrency gains could face greater scrutiny in the coming years, particularly those who assumed their transactions were outside the tax authority’s view.

Neela Chauhan, a partner at UHY Hacker Young, said there was growing concern among tax authorities that cryptocurrency activity was being used to avoid tax obligations.

“There is the expectation among tax authorities that cryptocurrency investment is rife with tax evasion.” — Neela Chauhan, Partner, UHY Hacker Young.

Crypto tax evasion concerns grow after crypto boom

The renewed focus on crypto tax evasion follows a period of substantial growth in cryptocurrency markets.

Bitcoin, the world’s largest cryptocurrency, has fallen sharply from around $117,000 a year ago to approximately $63,000 at the time of the report. However, HMRC’s concerns centre not only on current prices but also on gains generated during the cryptocurrency bull market that ran through the three years to October 2025.

Under UK tax rules, cryptocurrency is treated as an asset for tax purposes. Investors may therefore be liable for capital gains tax when they dispose of digital assets and make a taxable profit.

A disposal can occur in several ways. Selling cryptocurrency for pounds or another fiat currency is one example, but investors can also create a taxable event by exchanging one cryptocurrency for another, using cryptocurrency to purchase goods or giving digital assets to another person.

For the 2026 tax year, investors have a £3,000 capital gains tax annual exempt amount. Gains above that threshold may be taxed at 18 per cent for basic-rate taxpayers and 24 per cent for higher-rate taxpayers, depending on the individual’s circumstances.

These rules mean that crypto tax evasion can occur inadvertently as well as deliberately. Investors may not realise that swapping digital assets can trigger a tax liability, particularly when no money is converted back into pounds.

Chauhan said some cryptocurrency traders may be unfamiliar with HMRC’s requirements because of their age and limited previous experience dealing with the tax authority.

“A lot of the traders are young, have had little previous exposure to HMRC and often work under the assumption that HMRC has limited visibility over their activities.” — Neela Chauhan, Partner, UHY Hacker Young.

She also highlighted another potential source of confusion: cryptocurrency lending.

“Crypto investors often forget that you may still have made a taxable gain even when you are swapping one cryptocurrency for another and might not be aware that the income you can earn by lending cryptocurrencies is taxable.” — Neela Chauhan, Partner, UHY Hacker Young.

International data-sharing changes the picture

The biggest development in HMRC’s fight against crypto tax evasion is expected to be the arrival of transaction information from overseas cryptocurrency exchanges.

HMRC already has powers to request information from UK-based cryptocurrency businesses. However, the new international reporting arrangements will substantially expand the pool of data available to British tax officials.

By the end of May, exchanges in 52 jurisdictions are expected to begin providing information on UK residents. Those jurisdictions include the Channel Islands, the Cayman Islands and Ireland, alongside the UK.

The information will not be limited to basic account details. HMRC is expected to receive identifying information such as an investor’s name and address, National Insurance number and records of cryptocurrency transactions.

A further 15 jurisdictions are expected to begin sharing information with HMRC one year later, widening the international network available to the tax authority.

The new system also means HMRC’s approach is shifting from reliance on voluntary declarations and domestic investigations towards a more data-driven model. Officials will be able to compare information supplied by exchanges with tax returns and identify discrepancies that could warrant further examination.

Investors face closer scrutiny over unpaid tax

The increase in warning letters is therefore only one part of the broader response to crypto tax evasion.

HMRC is using the letters as an early intervention, giving investors an opportunity to correct their tax affairs before potentially facing a formal investigation. The authority’s expected access to international transaction records will then provide investigators with a much more detailed picture of cryptocurrency activity.

The crackdown does not mean every recipient of an HMRC warning has deliberately attempted crypto tax evasion. A warning letter can instead signal that the tax authority believes a taxpayer may have an undeclared liability and should review their records.

However, investors who knowingly fail to declare taxable gains could face significantly greater scrutiny once HMRC begins matching information from cryptocurrency exchanges with taxpayer records.

Chauhan described the likely effect of the new information-sharing arrangements in stark terms.

“Once HMRC has this data then tax investigations into cryptocurrency investors will be like shooting fish in a barrel.” — Neela Chauhan, Partner, UHY Hacker Young.

The combination of increased warning letters, broader international data-sharing and detailed transaction records marks a significant escalation in the UK’s campaign against crypto tax evasion.