UK Tax Authority Intensifies Crypto Investor Scrutiny with 140% Surge in Warning Letters

HM Revenue & Customs (HMRC) in the UK has dramatically escalated its enforcement of tax regulations on cryptocurrency investors, issuing 65,000 warning letters in the 2024-25 tax year, according to data obtained under the Freedom of Information Act. This marks a 140% increase from the previous year, when only 27,700 letters were sent, and over the past four years, HMRC has dispatched more than 100,000 such notifications to individuals and organizations.

These nudge letters are designed to prompt voluntary corrections to tax filings for unpaid capital gains on digital assets, with failure to comply potentially leading to formal investigations. The surge reflects HMRC's growing focus on crypto-related tax compliance, driven by rising adoption; the Financial Conduct Authority (FCA) estimates that 7 million UK adults now hold crypto assets, valued at approximately £12.9 billion, up from £7.8 billion in 2022.

Neela Chauhan, a partner at accounting firm UHY Hacker Young, highlighted the complexity of crypto tax rules, noting that many investors are unaware that swapping between coins can trigger capital gains tax. She warned that HMRC is increasingly gathering data directly from crypto exchanges and will intensify enforcement efforts, with plans to automatically access exchange data starting in 2026 under the OECD-led Crypto-Assets Reporting Framework. Capital gains tax applies to profits over the annual allowance of £3,000, and if trading is deemed professional, income tax and national insurance may apply.