UK cryptocurrency investors may still face tax bills even if they have not received warning letters from HM Revenue and Customs (HMRC), as the agency is intensifying efforts to track unreported digital asset income.
Last week, the Financial Times revealed that HMRC sent out nearly 65,000 "reminder letters" for the 2024-25 tax year, more than doubling the number sent the previous year. These letters urge investors to review their filing documents and proactively report cryptocurrency-related gains before potential audits begin.
However, tax experts warn that the agency is increasingly using exchange data and international reporting agreements, meaning that investors who have not received letters should not assume they are in the clear.
"Failing to report cryptocurrency transactions to HMRC is illegal, regardless of whether you have been contacted," said Andrew Duca, founder of cryptocurrency tax platform Awaken Tax, in an interview with Cointelegraph. "Therefore, even if you haven't received a warning letter, the fact that HMRC has sent out so many letters this year should serve as a wake-up call," he added.
Duca pointed out that HMRC typically identifies non-compliance by comparing bank records, exchange data, and self-assessment forms. Discrepancies, such as unreported deposits or transfers, may trigger letters or formal investigations.
He noted that with the increase in data sharing between exchanges and regulators, high-income earners and investors with large on-chain portfolios are particularly likely to be targeted.
Exchanges operating in the UK and those providing services to UK clients from abroad are legally required to provide transaction data to HMRC. With the OECD's Crypto-Asset Reporting Framework (CARF) set to take effect in 2026, the agency will automatically receive information from global trading platforms.
"It is much better to proactively report your activities now than to wait for HMRC to come knocking," Duca said.
He emphasized that cryptocurrency activities not only incur taxes when digital assets are converted to pounds but also when tokens are exchanged or income is generated through staking, airdrops, or yield farming. Only purchases made with fiat currency or transfers between personal wallets are tax-exempt.
To calculate gains, HMRC employs a three-tier "pooling" method. This includes first assessing transactions on the day, then transactions within a 30-day window, and finally using the average cost for older purchases. For active traders, this process can become very complex, and Duca recommends using specialized tax software designed for cryptocurrency reporting.
Duca advised that investors who receive letters from HMRC should seek professional advice immediately. Professional accountants can help prepare accurate transaction reports and negotiate with tax authorities if underpayment is discovered. Failing to respond may lead to fines or further investigations.
"Using cryptocurrency tax software will also help you generate accurate reports of all activities as accurately and efficiently as possible," Duca said. "Ultimately, you need to be prepared to make payments. If you owe taxes, you need to settle them."
Duca added that decentralized exchanges (DEX) and cold wallets are not exempt from HMRC reporting requirements. "You are legally required to report all DEX transactions, cold wallet activities, and hot wallet transfers," he said.
Meanwhile, in the United States, senators are exploring updates to cryptocurrency tax policies, including exemptions for small transactions and clarifications on how staking rewards are treated.
During a Senate Finance Committee hearing earlier this month, lawmakers discussed whether everyday cryptocurrency payments should trigger capital gains tax and how to fairly classify income generated from staking services. Coinbase's Vice President of Tax, Lawrence Zlatkin, urged Congress to adopt a minimum threshold exemption for cryptocurrency transactions under $300.
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Original article: “Experts Warn: UK Cryptocurrency Investors May Still Owe Taxes Even Without HMRC Warning Letters”
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