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

Cryptocurrency investors in the UK could face tax charges even if they have not received a warning letter from HM Revenue & Customs (HMRC). HMRC is stepping up its efforts to trace undeclared digital asset income.

Last week, the Financial Times revealed that HMRC had issued around 65,000 ‘nudge letters’ in the 2024-2025 tax year, more than double the number sent the previous year. The letter urges investors to review filings and voluntarily declare crypto-related profits before a potential audit begins.

But tax experts warn that authorities’ increased use of exchange rate data and international reporting conventions means investors who haven’t received a letter shouldn’t assume they’re in the clear.

“It is illegal not to report crypto transactions to HMRC, whether or not you have been contacted yet,” Andrew Duca, founder of crypto tax platform Awaken Tax, told Cointelegraph. “The fact that HMRC has issued so many warning letters this year should therefore act as a wake-up call, even if you have not received one.”

Mr Duca pointed out that HMRC typically identifies non-compliance by comparing bank records, exchange data and self-assessment forms. Discrepancies, such as undeclared deposits or transfers, can trigger a letter or formal investigation.

He said that as data sharing between exchanges and regulators increases, high-income earners and investors with large on-chain portfolios are likely to be particularly targeted.

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

HMRC increases oversight of cryptocurrencies

Exchanges operating in the UK, and those servicing UK customers overseas, are legally required to provide trading data to HMRC. The OECD’s Crypto Asset Reporting Framework (CARF) is scheduled to come into force in 2026, giving the OECD automatic access to information from global trading platforms.

“It’s much better to be proactive and report your activities now than to wait for a report from HMRC,” Mr Duca said.

He pointed out that cryptocurrency activity becomes taxable not only when digital assets are converted into pounds, but also when they are exchanged between tokens and when income is earned through staking, airdrops and yield farming. Only fiat purchases or transfers between personal wallets are exempt.

To calculate the gain, HMRC applies a three-layer ‘spooling’ method. This involves first evaluating same-day transactions, then evaluating transactions within 30 days, and finally using the average cost of older purchases. For active traders, this process can be quite complex, so Duca recommends using professional tax software designed for cryptocurrency reporting.

Related: New York State Senator Proposes Tax on Energy Use of Cryptocurrency Mining

What to do if you receive a call

Mr Duca said it was best for investors who received an HMRC letter to seek professional advice immediately. A professional accountant will assist you in preparing accurate transaction reports and will negotiate with the tax office if an underpayment is discovered. Failure to respond may result in penalties or further investigation.

“Crypto tax software also allows you to generate accurate reports on all your activities as accurately and efficiently as possible,” Duca said. “Finally, you need to be prepared to pay. If you owe taxes, you need to settle them.”

Duca added that decentralized exchanges (DEXs) and cold wallets are not exempt from HMRC reporting requirements. “We are legally required to report all DEX transactions, cold wallet activity, and hot wallet transfers,” he said.

Meanwhile, in the United States, senators are considering updating the virtual currency tax system, including exempting small transactions from taxation and clarifying the treatment of staking rewards.