HM Revenue and Customs (HMRC) has sent 81,000 warning letters to cryptocurrency investors suspected of underpaying tax in the last 12 months, according to national accountancy group UHY Hacker Young. The figure marks a 25% increase on the 65,000 letters sent in the previous tax year ending April 5.
Nudge letters and suspected capital gains
These “nudge” letters give individuals the opportunity to approach HMRC and disclose any underpaid tax before the tax authority investigates. Although prices of leading cryptocurrencies like Bitcoin and Ethereum have dropped since October of last year, tax collectors suspect large amounts of unpaid capital gains remain from the spike in value seen between December 2022 and October 2025.
Neela Chauhan, partner at UHY Hacker Young, said: “There is the expectation amongst tax authorities that cryptocurrency investment is rife with tax evasion.”
Complex tax treatment and common misunderstandings
Chauhan noted that many traders are young, have had little previous exposure to HMRC, and often assume HMRC has limited visibility over their activities. She added that the tax treatment of cryptocurrency in the UK is complex, and many individuals do not fully understand their reporting obligations or recognise when transactions give rise to taxable income or gains.
Chauhan said 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.”
Overseas exchanges and future data sharing
UHY notes that HMRC has the power to request information about UK taxpayers from cryptocurrency businesses based in this country. Chauhan said many individuals assume transactions through overseas exchanges fall outside HMRC's reporting requirements, particularly where no UK bank account is involved, but UK residents are generally subject to UK tax on their worldwide income and gains.
From May 31 2027, HMRC will automatically start receiving data on UK residents from cryptocurrency exchanges across 52 jurisdictions, including the Channel Islands, the Cayman Islands, Ireland and Liechtenstein. This information will include transactions, name, address and National Insurance number. A further 15 jurisdictions, including Singapore, Switzerland and Gibraltar, will begin providing information in 2028.
Disclosure service and penalties
Chauhan said once HMRC has this data, investigations into cryptocurrency investors will be “like shooting fish in a barrel,” adding that with basic AI-built software, HMRC will be able to build a comprehensive list of investors behind on capital gains tax or income tax.
Crypto investors can disclose unpaid tax using a disclosure service HMRC has set up. Those who approach the service before being prompted by HMRC will see penalties capped at 30% of the unpaid tax. If the facility is used after, penalties range from 70% to 100% of the unpaid tax, UHY says.
