No HMRC letter? UK crypto traders should owe taxes, knowledgeable warns

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

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

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

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

Duca famous that HMRC sometimes identifies noncompliance by evaluating financial institution data, alternate knowledge, and self-assessment types. Discrepancies, corresponding to undeclared deposits or transfers, can set off letters or formal investigations.

Larger earners and traders with massive onchain portfolios are particularly more likely to be focused as knowledge sharing between exchanges and regulators will increase, he stated.

Associated: The way to file crypto taxes in 2025 (US, UK, Germany information)

HMRC tightens crypto oversight

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

“It’s much better to be proactive and report in your exercise now, fairly than watch for HMRC to tug you up on it,” Duca stated.

He famous that crypto exercise turns into taxable not solely when digital belongings are transformed to kilos, but in addition once they’re swapped between tokens or generate revenue by way of 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” technique. This contains assessing same-day trades first, then transactions inside a 30-day window, and at last utilizing a mean value for older purchases. For energetic merchants, this course of can change into extremely advanced, and Duca recommends utilizing specialist tax software program designed for crypto reporting.

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

What to do if contacted

Duca stated traders who obtain an HMRC letter are finest 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 might 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 stated. “Lastly, it’s essential to be ready to pay. For those who owe taxes, you’ll must settle them.”

Duca added that decentralized exchanges (DEXs) and chilly wallets aren’t exempt from HMRC reporting necessities. “You’re legally required to report on all DEX transactions, chilly pockets exercise and sizzling pockets transfers,” he stated.

In the meantime, within the US, senators are exploring updates to crypto tax coverage, together with exempting small transactions from taxation and clarifying how staking rewards are handled.