UK taxman sends 81,000 warning letters to crypto holders

The UK tax authority sent 81,000 warning letters to crypto holders over the latest 12-month period, a 25% jump from the 65,000 dispatched the year before. The cumulative total since 2020 now exceeds 101,000 letters, according to Freedom of Information data obtained by accounting firm UHY Hacker Young.

The letters target individuals suspected of underreporting Capital Gains Tax on digital asset transactions. The tax authority has been expanding this enforcement campaign annually. Taxable events include selling Bitcoin for pounds, swapping one token for another, earning income from crypto lending, or converting tokens through decentralized protocols.

Neela Chauhan, a partner at UHY Hacker Young, said tax authorities expect crypto investment to be rife with tax evasion.

Token-to-token swaps are a particular blind spot, Chauhan said. Someone who traded ETH for a smaller altcoin in 2024 may not have realized they crystallized a gain on their ETH position at the point of the swap.

UK-based crypto exchanges are required to share customer transaction data with HMRC. International tax treaties give HMRC access to data from exchanges operating in other jurisdictions.

The letters themselves do not carry penalties. Ignoring them triggers a different response. If HMRC follows up with a formal investigation and finds unreported gains, penalties can range from a percentage of the unpaid tax to criminal prosecution.

HMRC has signaled this is not a one-off campaign. An additional wave of nudge letters is scheduled from July 2026 through March 2027.

The UK is not acting in isolation. Tax authorities across the OECD are moving toward standardized reporting frameworks, with the Crypto-Asset Reporting Framework set to facilitate automatic information exchange between participating countries.