UK Tax Authority Intensifies Crypto Tax Collection Efforts

• HMRC increases crypto tax warning letters to 65,000, doubling last year’s figure.

• UK crypto ownership surges to 7 million, with £12.9 billion in digital assets held.

• HMRC gains direct access to global exchange data, enhancing crypto tax enforcement.

The UK tax authority, HM Revenue & Customs (HMRC), has increased its efforts to address unpaid capital gains tax on cryptocurrency holdings. According to a Financial Times report, the number of warning letters sent to crypto investors has more than doubled compared to the previous year, indicating HMRC’s intensifying focus on tax enforcement within the growing digital asset market.

HMRC has sent out approximately 65,000 “nudge letters” to individuals suspected of owing taxes on their cryptocurrency holdings for the 2024–2025 tax year. This represents an increase from the 27,700 letters issued in 2023, based on data obtained through the Freedom of Information Act.

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The letters aim to encourage crypto traders to settle any outstanding tax liabilities before formal investigations are initiated. These warnings come along with the expanding crypto market in the UK, with over 7 million adults now holding digital assets, a rise from previous years.

FCA Reports Growth in Crypto Ownership

The growing interest in cryptocurrency is reflected in data from the Financial Conduct Authority (FCA), which estimates that 7 million UK adults own crypto assets, up from 5 million in 2022. The value of these holdings has also surged, with UK investors now holding around £12.9 billion in digital assets, a £5.1 billion increase from 2022.

Bitcoin, in particular, has seen a 315% price increase over the last two years, further driving interest in the market. However, the rise of crypto ownership has raised the need for clearer awareness and adherence to tax regulations.

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HMRC’s Enhanced Data Access

HMRC’s oversight of the crypto market has improved due to direct access to transaction data from major crypto exchanges. Starting in 2026, HMRC will have automatic access to global exchange data through the Organisation for Economic Co-operation and Development (OECD)’s Crypto-Assets Reporting Framework (CARF).

This process will help HMRC identify individuals who have not complied with capital gains tax obligations on their digital asset transactions. However, experts warn that as HMRC’s access to data expands, it will become increasingly difficult for crypto investors to avoid scrutiny.

Implications of HMRC’s Tax Regulations

Under current regulations, UK crypto investors must pay capital gains tax on profits exceeding the annual allowance of £3,000. If an individual is classified as “trading” in crypto assets, they may also be liable for income tax and national insurance.

Additionally, HMRC has advised investors to maintain detailed records of their transactions and to file annual self-assessment returns to avoid penalties. As HMRC continues to refine its data collection methods, individuals who fail to report capital gains or income may face increased enforcement actions.