Extracted from an article on uhy-uk.com by Neela Chauhan 06 Nov 2025
The number of nudge/warning letters HMRC has issued to individuals suspected of owing tax on their cryptocurrency dealings increased 134% in the tax year 2024/25 to 65,000, up from 27,700 the previous year*.
The sharp rise in cryptocurrencies prices since 2023 means that the amount of undeclared Capital Gains Tax from crypto investments has also ballooned.
HMRC sends ‘nudge letters’ to those it suspects of tax avoidance or evasion to ‘nudge’ them into paying that missing tax before they open an investigation into them. They normally warn them that they could be subject to a tax investigation and even prosecution if they underpay tax in a particular area.
The amount of undeclared capital gains could be substantial, given that around seven million UK adults now hold an estimated £12.9 billion in crypto assets, up from £7.8 billion in 2022**, and that Bitcoin prices have risen by 315% in the last two years to 6 October 2025.
HMRC’s ability to trace crypto activity is extensive, including tracking crypto transactions back to UK bank accounts and obtaining data directly from UK based crypto exchanges. 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.
Neela Chauhan, partner in the UHY London office, says:
“HMRC is clearly stepping up its efforts to identify crypto traders who may have underpaid tax. Some crypto users don’t realise they should have declared their gains in the first place.”
“You do get some crypto traders who are opposed to idea of paying tax on their gains.”
Crypto holders may be liable for Capital Gains Tax when they sell their assets, or for income tax – which carries higher rates – if HMRC classifies them as ‘traders’. This can include people who mine crypto, earn from staking or airdrops, or trade very frequently.
Neela Chauhan adds: “As HMRC gains access to more data, it will likely intensify its tax crackdown on crypto investors. Those who haven’t declared their capital gains will find it increasingly difficult to avoid the tax authority’s attention.”
The recent softening of the UK’s stance of UK authorities to cryptos, particularly towards pound-pegged stablecoins, may prompt many more individuals to enter the market, intensifying the problem of undeclared capital gains.
Neela Chauhan says: “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 to avoid facing severe penalties.”
