HMRC sends 65,000 ‘nudge’ letters to crypto traders

HMRC sends 65,000 ‘nudge’ letters to crypto traders

In a push to improve tax compliance, HMRC has sent out over 65,000 nudge letters to ‘hobby crypto traders’ it suspects are underpaying tax on gains.

There is an estimated £12.9bn held by UK taxpayers in crypto, up from £7.8bn in 2022. HMRC has decided it is not waiting for the new global rules on the cryptocurrency trading platform disclosures coming in next year, before ramping up its compliance activity.

The number of warning letters HMRC has issued to individuals suspected of owing tax on their cryptocurrency dealings has increased by 134% in the tax year 2024/25 to 65,000, up from less than 28,000 the previous year.

It is believed that the sharp rise in cryptocurrencies prices since 2023 means that the amount of undeclared capital gains tax (CGT) from crypto investments has also ballooned.

HMRC has used the tactic of sending nudge letters to people it suspects of tax avoidance or evasion to give them the chance to pay their tax bills before an investigation into them is opened for some time.

It is believed that the amount of undeclared CGT could be substantial, given that Bitcoin prices alone are said to have risen by 315% in the last two years to October 2025. At the same time with less regulatory pressure more people are feeling comfortable about putting their money into crypto, fuelled by soaring values.

With effect from 1 January 2026, an OECD agreement will give HMRC access to information on crypto transactions carried out in other jurisdictions, making it easier to identify UK crypto holders’ overseas activity.

The problem is that there is low awareness of the complicated tax rules for crypto and so HMRC is trying to get the message out about CGT liability. A new box in the annual self-assessment tax return forms may help spur people into declaring gains, while Making Tax Digital for Income Tax for £50k plus earners is likely to give HMRC an additional insight.

The tax rules on cryptocurrency can be unclear, particularly when it comes to determining when an individual should pay income tax on their crypto assets. Those holding larger crypto holdings should seek professional advice.

Crypto holders can be liable for CGT when they sell their assets, or for income tax if HMRC classifies them as ‘traders’. This can include people who mine crypto, earn from staking or airdrops, or trade very frequently.

Crypto-Asset Reporting Framework (CARF) disclosure – what does this mean

Big changes are coming down the line which will give HMRC access to crypto trading data with the rollout of OECD’s CARF in the UK, effectively a register of crypto trading.

The UK introduction of CARF goes live in spring 2026 with the first UK reporting required from 31 May 2027, and then international sharing of data between international tax authorities starting later in 2027.

HMRC already receives data from crypto exchanges and other financial intermediaries, both in the UK and overseas, which alongside the monitoring of online activity has driven the recent increase in nudge letters.