UK crypto investors might face tax liabilities even if they haven’t received any warning letters from HM Revenue & Customs (HMRC). The agency is intensifying its efforts to monitor undeclared income from digital assets.

Recently, the Financial Times revealed that HMRC issued nearly 65,000 “nudge letters” in the 2024–25 tax year, which is more than double than in previous years. These letters encourage recipients to review their tax filings and voluntarily declare any crypto gains prior to potential audits.

However, tax professionals caution that just because an investor hasn’t received a letter doesn’t mean they are off the hook. “Not reporting cryptocurrency transactions to HMRC is illegal, regardless of whether you’ve been contacted yet,” said Andrew Duca, founder of Awaken Tax. “The issuance of so many letters this year should be a wake-up call.

Duca explained that HMRC typically detects noncompliance by comparing bank records, exchange data, and self-assessment forms. Any discrepancies, such as unreported deposits or transfers, could lead to letters or investigations.

Higher earners and those with significant on-chain investments are increasingly targeted as data sharing between exchanges and regulators becomes more prevalent.

Example of a previous nudge letter sent in 2024. Source: kc-usercontent

For those individuals who receive an HMRC letter, it’s recommended to obtain professional assistance promptly. Experienced accountants can prepare accurate transaction reports and negotiate with the tax authorities in case of any underpayments. Ignoring such communications could result in penalties or further inquiry.

In international news, U.S. senators are currently exploring updates to crypto tax policies, including potential exemptions for minor transactions.