HMRC crypto letters, tax rules and what to check
Overview
HMRC is using information about crypto asset activity to identify possible unpaid tax. UHY Hacker Young reported that HMRC issued 64,982 crypto-related nudge letters in 2024/25, citing HMRC figures. That historical number is not a count of confirmed tax debts or the number of letters being sent in 2026.
A nudge letter is not, by itself, a tax bill or proof that tax is due. It is a prompt to check your transactions, records and tax returns, and to follow the instructions in the particular letter.
For most individuals, cryptoassets are investments. Capital Gains Tax (CGT) can arise on sales, token exchanges, spending and gifts. Income Tax can also apply to employment payments, mining, staking and other receipts.
This guide mainly concerns UK-resident individuals, including sole traders and directors holding crypto personally. Companies, non-residents and people claiming special residence-related reliefs need separate advice. The examples refer to 2025/26, which ran from 6th April 2025 to 5th April 2026.
Detailed Content
Why HMRC is contacting crypto holders
HMRC can obtain information from cryptoasset service providers and compare it with tax returns and other records. A letter may identify a possible omission, but the information still needs checking against the complete transaction history.
UK Cryptoasset Reporting Framework (CARF) rules took effect on 1st January 2026. In-scope providers collect user and transaction information for the 2026 calendar year and submit their first reports to HMRC between 1st January and 31st May 2027. This is not the same as international automatic exchange starting on 1st January 2026, and it does not replace existing information-gathering powers or taxpayers’ own reporting duties.
An overseas exchange, private wallet or decentralised finance (DeFi) arrangement does not, by itself, remove a UK tax obligation. Do not assume every platform or transaction is covered identically by CARF.
What counts as a disposal?
A disposal commonly occurs when you:
Sell tokens for pounds or another currency.
Exchange one cryptoasset for a different cryptoasset, including a stablecoin.
Use tokens to buy goods or services.
Give tokens to someone else.
A disposal does not automatically mean tax is payable: the gain, losses, exemptions and reliefs must be calculated first. No cash withdrawal is needed for a taxable gain to arise.
Gifts normally use market value. Transfers to a spouse or civil partner living with you are generally on a no-gain/no-loss basis, with the relevant cost carried over. Gifts to charity can also have special treatment.
Moving the same tokens between wallets you own is normally not a disposal if beneficial ownership remains unchanged. However, tokens used to pay a transfer fee may themselves be disposed of. Lending, staking or depositing tokens into a DeFi arrangement can also create a disposal where beneficial ownership passes to someone else. Check the terms rather than treating every movement as a simple wallet transfer.
Calculating gains and losses
Use sterling values at the relevant transaction dates and deduct allowable costs. Apply the matching rules in order: same-day acquisitions, qualifying acquisitions within 30 days after disposal, then the Section 104 pool.
Maintain a separate pool for each type of fungible token across all your personal wallets and exchanges, not a separate pool for each platform. NFTs and other individually identifiable assets may require different treatment. Transaction fees can be allowable, but not every expense qualifies and the same cost cannot be deducted twice.
The £3,000 annual exemption and reporting
For most individuals, the CGT annual exempt amount is £3,000 for both 2025/26 and 2026/27. It covers overall qualifying gains across assets, not £3,000 per token, exchange or transaction. Certain claims, including foreign income and gains relief or Overseas Workday Relief, remove entitlement to the exemption.
Ordinary crypto investment gains in 2025/26 are generally taxed at 18% to the extent they fall within the available basic-rate band and 24% above it. Calculate this using taxable income and taxable gains, not simply your employment tax label. Older years may have different rates and allowances.
Even if gains are below the exemption, someone registered for Self Assessment must report gains where total disposal proceeds across relevant assets exceed £50,000. This concerns proceeds, not profit or the value of tokens still held. Loss claims and other circumstances can also require reporting. A notice to file must be dealt with even where no tax is due.
Self Assessment returns have a dedicated cryptoasset section from 2024/25 onwards. For 2025/26, the normal paper deadline is 31st October 2026 and the online filing and payment deadline is 31st January 2027. If registration was required, the normal notification deadline was 5th October 2026; if missed, act promptly. A later filing deadline notified by HMRC does not normally extend the payment deadline.
Eligible UK-resident individuals can alternatively use HMRC’s real-time CGT service for relevant gains. For 2025/26, report through that service by 31st December 2026 and pay by 31st January 2027. If already registered for Self Assessment, include the gains in the return as well. The real-time service does not report crypto income or replace other return obligations.
Income Tax alongside CGT
Tokens received as employment pay are normally employment income, and PAYE and National Insurance can apply. Non-trading mining, staking and lending receipts may be miscellaneous income; trading activity requires a separate assessment.
The £1,000 trading and miscellaneous income allowance may apply, subject to its conditions. It is shared across qualifying income sources, not a separate allowance for each crypto activity, and does not shelter employment income.
Airdrops are not always taxable on receipt. A genuinely unsolicited personal receipt with nothing done in return and no relevant trade may fall outside Income Tax. Airdrops received for services can be taxable, and a later disposal may create a capital gain either way.
DeFi returns require particular care: the contract can affect whether a return is income or capital and when it arises. A subsequent disposal of tokens already taxed as income can create a separate gain or loss, with the amount subject to Income Tax taken into account to prevent double taxation.
Frequent transactions alone do not automatically make an individual a crypto trader for tax purposes. Personal and company transactions must remain clearly separated.
Records and evidence
Download complete exchange histories and retain wallet addresses, transaction hashes, dates, quantities, fees, sterling valuations and valuation sources. Include fiat deposits and withdrawals, rewards, gifts and transfers, with pooled costs before and after disposals.
Keep acquisition records while assets remain held and for the required period after disposal. Older purchases can still determine the cost of a current disposal. Retain records longer where an enquiry, disclosure or dispute requires it.
Tax software can help, but missing wallets, duplicate imports, unmatched transfers and incorrect valuations can materially distort its output. Never share a wallet seed phrase or private key as tax evidence.
Corrections, disclosures and penalties
The correct route depends on the year, whether a return exists, the amendment window and whether HMRC has opened an enquiry. Current and previous tax-year income or gains normally belong on the appropriate return or amendment. HMRC’s Cryptoasset Disclosure Service may be suitable for older unpaid tax. Do not assume the service replaces an existing enquiry response.
Inaccuracy penalties are based on potential lost revenue, behaviour and disclosure. Under the ordinary rules:
Reasonable care: no inaccuracy penalty.
Careless: 0%–30% for unprompted disclosure, or 15%–30% if prompted.
Deliberate: 20%–70% unprompted, or 35%–70% prompted.
Deliberate and concealed: 30%–100% unprompted, or 50%–100% prompted.
These are not universal limits for every case. Separate failure-to-notify, filing and payment penalties can apply, and offshore rules may increase exposure. Interest may also be due. A disclosure after a targeted HMRC letter may be prompted; acting promptly does not automatically make it unprompted or guarantee no penalty.
Step By Step Procedure
Check the letter is genuine using independently sourced HMRC contact details. Note the years, requested action and response date.
Gather complete records from every exchange and wallet, including historical acquisitions still relevant to current pools.
Classify purchases, disposals, gifts, own-wallet transfers, fees and income receipts. Review DeFi arrangements separately.
Calculate sterling gains and losses using the correct matching rules. Calculate income separately and avoid double counting.
Compare the results with filed returns, allowances, reporting triggers and deadlines for each year.
Obtain advice where several years, incomplete records, company assets, offshore issues or deliberate conduct may be involved. Use the appropriate correction or disclosure route and respond to HMRC by the applicable date.
Retain calculations and correspondence, arrange payment or discuss affordability with HMRC, and keep future records up to date.
360 Accounts & Bookkeeping can help review the records, identify reporting requirements and support corrections or disclosures. Complex crypto arrangements may require specialist tax input.
Frequently Asked Questions and Answers
Does a crypto nudge letter mean I definitely owe tax?
No. Check the letter against your complete records and returns. Follow its instructions; there is no universal response deadline for every nudge letter.
Is swapping Bitcoin for another token taxable?
It is normally a disposal, even without a cash withdrawal. Whether CGT is payable depends on the gain, losses, exemption and other circumstances.
Are transfers between my own wallets taxable?
Normally not if ownership of the same tokens remains with you. Keep evidence, consider tokens spent on fees, and distinguish ordinary transfers from DeFi deposits or token exchanges.
Must I report gains below £3,000?
Possibly. If registered for Self Assessment, disposal proceeds above £50,000 trigger reporting even where gains are below the exemption. Loss claims, an HMRC notice or other circumstances may also require action.
Are staking and mining rewards always capital gains?
No. They can be taxable income. Later disposals may produce capital gains or losses. DeFi returns and trading cases need more detailed analysis.
What happens if I give crypto to family?
A gift is generally a market-value disposal. Qualifying transfers to a spouse or civil partner living with you are normally no-gain/no-loss, but gifts to children or other relatives do not receive that treatment merely because they are family.
Can a director use a personal wallet for company activity?
Company and personal ownership must be clearly evidenced and accounted for separately. A mixed wallet can create accounting, Corporation Tax and director’s loan issues. Seek advice before transferring assets between yourself and the company.
What penalties apply to undeclared crypto tax?
There is no automatic 30% minimum. The applicable rules depend on what went wrong, the tax years, behaviour and disclosure. Reasonable-care inaccuracies attract no inaccuracy penalty, but tax, interest or other penalties may still need consideration.