The number of warning letters sent to individuals suspected of underreporting or avoiding taxes on earnings from digital assets has doubled as the UK tax office has increased its examination of cryptocurrency investors.
Crypto tax evasion in the UK
Using information gathered through the Freedom of Information Act, the Financial Times said Friday that HM Revenue & Customs (HMRC) sent out around 65,000 letters during the 2024–2025 tax year, up from 27,700 the previous year.
The purpose of the so-called “nudge letters” is to encourage investors to voluntarily amend their tax returns before the start of official inquiries.
The significant rise is a result of HMRC’s increased emphasis on tax compliance with regard to cryptocurrency. The government has written over 100,000 of these letters in the last four years, and as cryptocurrency use and asset values increased, so did activity.
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UK and cryptocurrency
According to the Financial Conduct Authority, seven million individuals in the UK already own cryptocurrency, jumping from 4.4% (2.2 million) in 2021 or almost 10% (5 million) in 2022.
The FT was informed by Neela Chauhan, a partner at UHY Hacker Young, which filed the FOI request, that “the tax rules surrounding crypto are quite complex and there’s now a volume of people who are trading in crypto and not understanding that even if they move from one coin to another it triggers capital gains tax.”
HMRC now has a far better understanding of the market. Major cryptocurrency exchanges already provide the agency with transaction data directly.
And starting in 2026, it will automatically access worldwide exchange data through the Organisation for Economic Co-operation and Development’s (OECD) Crypto-Assets Reporting Framework (CARF).
Crypto tax developments in the UK
US senators are looking into changes to the tax code that would exclude minor transactions from taxes and make it clearer how staking rewards are handled.
Legislators discussed how to correctly categorise revenue from staking services and whether regular cryptocurrency payments should be subject to capital gains tax during a Senate Finance Committee meeting earlier this month.
Lawrence Zlatkin, the vice president of taxes at Coinbase, pushed lawmakers to enact a de minimis exemption for cryptocurrency transactions under $300.
Ever since cryptocurrency gained its market, governments all across the globe have been coming up with tax regimes to support and properly regulate digital assets. Since cryptocurrencies are decentralised in nature and hard to track, tax evasion cases have been rising around the globe.
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