HM Revenue and Customs has sharply increased the number of crypto tax warning letters HMRC sends to cryptocurrency investors, as the tax authority steps up efforts to identify people who may have failed to declare taxable gains.

In the 2025–26 financial year, HMRC sent 81,172 letters, emails and text messages to cryptocurrency holders it suspected may have underpaid tax.

That represents a substantial increase from the 27,714 warnings issued in 2023–24.

The figures, obtained through a Freedom of Information request by accountancy firm UHY Hacker Young and seen by the BBC, suggest HMRC is putting considerably more attention on cryptocurrency tax compliance.

Crypto investors should also be aware that exchanging one cryptocurrency for another can potentially create a taxable disposal.

Simply keeping proceeds within the crypto market does not necessarily mean there is nothing to report.

Why Is HMRC Sending Crypto Tax Warning Letters?

HMRC sends compliance letters and other messages when information available to the tax authority suggests an individual’s tax affairs may need reviewing.

The recent increase is particularly significant.

Financial year	Crypto tax warnings reported
2023–24	27,714
2025–26	81,172

The 2025–26 figure is almost three times the number reported two years earlier.

HMRC said it regularly contacts taxpayers to educate, remind or prompt them to review their tax affairs, including people using cryptoassets.

Receiving a warning does not automatically mean HMRC has established that tax is owed.

However, ignoring a legitimate communication could create greater problems if undeclared taxable gains are subsequently identified.

This fits with HMRC’s wider approach to tax compliance, where taxpayers may also need to understand the HMRC penalty points system and their responsibilities for making accurate submissions.

Why Is HMRC Focusing More Closely on Cryptocurrency?

One major reason is the rapid increase in cryptocurrency valuations during recent years.

Between approximately December 2022 and October 2025, Bitcoin reportedly rose from around £14,000 to £90,000.

That period potentially created substantial profits for investors who bought cryptocurrency at lower prices and later sold or exchanged their holdings.

Although Bitcoin has subsequently fallen to approximately £48,000, according to the information supplied, HMRC’s concern relates to taxable gains generated during previous periods rather than simply today’s cryptocurrency price.

Someone who sold cryptocurrency during a strong market could therefore have generated a taxable gain even if the same asset has since fallen significantly.

Interest in areas such as institutional crypto trading strategies also demonstrates how cryptocurrency has increasingly moved beyond a niche investment market into wider financial activity.

Does Selling Cryptocurrency Create a Capital Gains Tax Liability?

Potentially.

The key issue highlighted by the HMRC warnings is that cryptocurrency investors may need to consider Capital Gains Tax when disposing of cryptoassets at a profit.

Importantly, a disposal does not necessarily mean converting cryptocurrency into pounds and withdrawing the money to a bank account.

The information surrounding HMRC’s latest warning campaign specifically highlights that investors could still have tax obligations when they exchange one cryptocurrency for another.

For example, someone might:

• Buy Bitcoin.
• See its value increase.
• Exchange the Bitcoin for Ethereum.
• Never withdraw sterling to their bank account.

The fact that no pounds were withdrawn does not automatically mean there was no taxable event.

This is one of the areas that can cause confusion among newer cryptocurrency traders.

Why Might Some Crypto Investors Have Failed to Declare Gains?

UHY Hacker Young partner Neela Chauhan suggested that some cryptocurrency traders are relatively young and may have had little previous interaction with HMRC.

Some may therefore incorrectly assume that cryptocurrency transactions remain largely invisible to tax authorities.

According to Chauhan, there is an expectation among tax authorities that cryptocurrency investment presents significant tax-evasion risks.

The problem is particularly relevant where investors make numerous transactions across different exchanges or wallets.

Cryptocurrency can move between exchanges, private wallets and other platforms without necessarily passing through a conventional bank account every time.

However, this should not be interpreted as meaning the transactions have no tax consequences.

The growth of crypto wallets in UK spending also shows how digital assets are increasingly being used outside straightforward buy-and-hold investing.

What Should Someone Do After Receiving an HMRC Crypto Letter?

A genuine HMRC crypto tax warning should be treated seriously, but recipients should first establish exactly what HMRC is asking them to do.

Depending on the communication, HMRC may be prompting the taxpayer to review earlier returns or determine whether previously undeclared cryptocurrency gains exist.

Useful records could include:

• Cryptocurrency purchase dates.
• Original purchase values.
• Sale dates and values.
• Crypto-to-crypto exchanges.
• Exchange transaction histories.
• Wallet transaction records.
• Fees associated with transactions.
• Previous tax returns.

Investors with large numbers of transactions may find reconstructing older trading activity difficult, particularly where several exchanges have been used.

However, responding accurately is preferable to ignoring the issue.

Anyone who needs to submit information should also pay attention to applicable UK tax filing deadlines rather than assuming HMRC’s initial warning removes ordinary reporting obligations.

Does Receiving an HMRC Letter Mean Tax Is Definitely Owed?

No.

The reported communications include letters, emails and text messages sent to people HMRC suspects may have underpaid tax.

A compliance prompt is therefore not the same thing as a final tax assessment.

Someone may review their transactions and determine that they do not have an additional liability. Another investor may discover gains that should previously have been declared.

The important distinction is between HMRC asking someone to review their position and HMRC formally establishing that a particular amount is due.

Taxpayers should therefore avoid assuming either that the letter can safely be ignored or that the amount HMRC suspects must automatically be correct.

Could Crypto Investors Face HMRC Penalties?

The supplied information warns that investors could potentially face financial penalties or prosecution where taxable profits have not been properly declared.

The outcome will depend on the circumstances.

There is an important difference between a taxpayer making an error, misunderstanding their obligations and deliberately concealing taxable income or gains.

HMRC’s increasing use of compliance prompts gives investors an opportunity to review their position before cryptocurrency reporting becomes even more extensive.

Those dealing with other HMRC repayment or compliance issues may also find it useful to understand situations where HMRC wants tax back after reviewing a taxpayer’s affairs.

What Changes Are Coming From March 2027?

The pressure on cryptocurrency investors could increase significantly from March 2027.

Under the changes described in the supplied information, cryptocurrency platforms based in dozens of countries outside the UK will be required to share information about customers with tax authorities.

That could give HMRC considerably greater visibility over cryptocurrency holdings and transactions taking place through overseas platforms.

HMRC previously said the changes would help ensure cryptocurrency investors pay the correct amount of tax.

The government estimated that the measures could raise as much as £315 million by April 2030.

For investors who have assumed overseas cryptocurrency exchanges provide anonymity from HMRC, the expansion of international information sharing is particularly important.

Why Could HMRC Crypto Investigations Become Easier?

The central issue is data.

At present, HMRC may have to combine information from several sources when identifying potential cryptocurrency tax liabilities.

Greater automatic reporting from crypto platforms could make this substantially easier.

Chauhan warned that once HMRC obtains more comprehensive customer data, investigations into cryptocurrency investors could become like “shooting fish in a barrel”.

The analogy reflects how easily tax authorities could potentially compare information submitted by cryptocurrency platforms against individuals’ tax records.

Where reported trading activity does not correspond with declared gains, HMRC could have a clearer reason to investigate.

Could HMRC See Cryptocurrency Held Overseas?

The forthcoming information-sharing requirements are particularly relevant to this question.

Keeping cryptocurrency on an exchange outside Britain should not automatically be interpreted as keeping the activity outside HMRC’s view.

From March 2027, more overseas cryptocurrency platforms are expected to supply customer information to tax authorities under the changes described.

International data sharing therefore reduces the effectiveness of relying on geographical location as a way of keeping transactions private from tax authorities.

What Should Crypto Investors Check Now?

Cryptocurrency holders who traded during periods of substantial market growth may want to review their historical transactions before HMRC’s access to international crypto data expands further.

Particular attention may be needed where an investor:

• Sold cryptoassets after substantial price increases.
• Exchanged one cryptocurrency for another.
• Used several cryptocurrency exchanges.
• Used platforms located outside the UK.
• Has incomplete records of older transactions.
• Previously assumed tax only applied after withdrawing cash.
• Has already received an HMRC warning.

Investors should avoid estimating figures where accurate historical transaction records can still be obtained.

Where the position is complicated, professional tax advice may be appropriate.

Are HMRC Crypto Warning Letters Likely to Continue?

The increase from 27,714 communications in 2023–24 to 81,172 in 2025–26 suggests cryptoasset taxation has become a much more significant compliance priority.

International reporting changes expected from March 2027 could further strengthen HMRC’s ability to identify discrepancies.

That means investors should not assume falling cryptocurrency prices will reduce HMRC’s interest.

The important question for tax purposes is what happened when assets were disposed of during previous tax years, including periods when Bitcoin and other cryptocurrencies experienced substantial gains.

Conclusion

The surge in crypto tax warning letters HMRC has sent shows that cryptocurrency taxation is becoming an increasingly important compliance area.

More than 81,000 warnings were reportedly issued during 2025–26, compared with 27,714 in 2023–24.

Investors should check historic sales and crypto-to-crypto exchanges rather than assuming tax only becomes relevant when money reaches a bank account.

With wider international exchange reporting expected from March 2027, HMRC could soon have substantially greater visibility over cryptocurrency transactions.

Frequently Asked Questions

Why has HMRC sent crypto investors warning letters?

HMRC suspects some cryptocurrency investors may have made taxable gains without correctly declaring them. The communications are intended to prompt taxpayers to review their tax affairs.

How many HMRC crypto warning letters were sent?

According to the supplied FOI figures, HMRC sent 81,172 letters, emails and text messages in 2025–26, compared with 27,714 in 2023–24.

Does swapping Bitcoin for another cryptocurrency count?

The information accompanying the HMRC warning states that exchanging one cryptocurrency for another can still result in a taxable disposal. Withdrawing money to a UK bank account is not necessarily required.

Does an HMRC crypto letter mean someone has broken the law?

Not automatically. HMRC may send a communication because its information suggests the taxpayer should review their affairs.

Whether additional tax or penalties are due depends on the individual’s circumstances.

What happens to crypto reporting in March 2027?

Cryptocurrency platforms in dozens of countries outside the UK are expected to begin sharing more customer information with tax authorities, potentially giving HMRC greater visibility over overseas crypto activity.

Can falling Bitcoin prices remove an earlier tax liability?

A later fall in Bitcoin’s price does not automatically remove tax consequences arising from an earlier disposal at a gain.

The relevant transaction and circumstances need to be considered for the period in which it occurred.