An HMRC crypto letter does not establish a tax liability. HMRC may hold information about crypto disposals without having the complete acquisition history needed to calculate the taxable gain
An HMRC crypto letter does not establish a tax liability. HMRC may hold information about crypto disposals without having the complete acquisition history needed to calculate the taxable gain accurately. Under Schedule 24 to the Finance Act 2007, the minimum penalty for a careless error disclosed unprompted is 0% of the unpaid tax. For a prompted disclosure, it is 15%. HMRC's manual (CH82420) treats a disclosure as unprompted only where the taxpayer had no reason to believe HMRC had discovered, or was about to discover, the error. A letter stating that HMRC holds data on your crypto disposals makes that position hard to maintain.
HMRC sent 81,172 crypto-related letters, emails and texts in 2025-26, compared with 27,714 in 2023-24. It selects recipients where exchange data does not match the tax position they have reported.
For anyone who receives one, the question is not whether to respond. It is what the letter reveals about HMRC's information, and how it changes the cost of each available response. Answering that means distinguishing a nudge letter from a formal compliance check, quantifying the penalty effect and assessing the risk of signing a declaration that no tax is due. It also brings forward a deadline many investors overlook.
At Crypto Accountants, Malik Ali FCCA and our team help individuals and Web3 businesses respond to HMRC crypto letters. We rebuild your transaction history, calculate the gain you owe tax on and, where needed, our crypto tax advisory specialists handle the disclosure and correspondence with HMRC.
HMRC has access to more information about cryptoasset transactions and is using it to identify possible unpaid tax.
Figures obtained through Freedom of Information requests show that HMRC sent 27,714 crypto-related letters in 2023-24 and 64,982 in 2024-25. In the latter year, crypto letters accounted for 62.4% of all Capital Gains Tax letters sent by HMRC.
A separate FOI request by UHY Hacker Young found that HMRC sent 81,172 crypto-related communications in 2025-26, including letters, emails and texts.
The rise in Bitcoin's value has also brought crypto gains into focus. Bitcoin went from around £14,000 in December 2022 to around £90,000 in October 2025. Investors who sold or exchanged their holdings during this period may have created taxable gains.
HMRC's crypto nudge letters are part of its efforts to identify possible gaps in tax reporting.
The CIOT confirmed in 2024 that HMRC's Wealthy Team was involved in sending One-to-Many crypto letters. These are standard letters sent to groups of taxpayers where HMRC has identified a possible tax risk.
A letter may therefore mean that HMRC has information about your crypto activity that it wants you to review. It does not, however, prove that you owe tax. HMRC may not have your full transaction history or the information needed to calculate your actual gains.
Not all HMRC letters have the same legal status. Before responding, check which type you have received.
Most importantly, a nudge letter is not the same as a formal investigation. HMRC uses these letters to encourage people to review their tax affairs and correct any errors.
However, do not ignore one.
If HMRC opens a formal compliance check, you can still disclose unpaid tax, but you will generally need to deal directly with the officer handling the case.
Getting expert help with an HMRC nudge letter at this stage keeps your options open before any formal check begins.
One concern for anyone who discovers an error is whether receiving a nudge letter increases the penalty.
It can affect the calculation, but the result depends on the circumstances.
HMRC distinguishes between prompted and unprompted disclosures.
An unprompted disclosure is made when you have no reason to believe HMRC has discovered, or is about to discover, the error.
A prompted disclosure is made after you have reason to believe HMRC knows about the issue.
HMRC's manuals, CH82420 and CH82421, explain that the distinction depends on the facts. A general tax campaign does not automatically make a disclosure prompted.
A personalised crypto letter may make it harder to argue that your disclosure was unprompted, particularly if HMRC has already identified information relating to your transactions. But receiving a letter does not automatically settle the question.
Let’s assume someone who made a £26,000 gain in 2023-24 but did not report it.
Assuming they qualify for the £6,000 annual exempt amount and the remaining £20,000 is taxed at 20%, the unpaid tax would be £4,000.
If the issue involves an inaccurate tax return, the standard Schedule 24 penalty ranges would be:
For a careless error involving £4,000 in unpaid tax, the penalty could therefore range from £0 to £1,200 if unprompted, or £600 to £1,200 if prompted.
Interest on unpaid tax may also apply.
These figures relate to inaccuracies under Schedule 24, Finance Act 2007. If you failed to notify HMRC that tax was due, Schedule 41, Finance Act 2008, may apply instead. Its penalty rules are different.
The penalty will depend on the behaviour involved and the quality of your disclosure. It is not automatically the maximum amount.
HMRC's normal assessment time limits depend on the reason for the unpaid tax:
Four years where reasonable care was taken.
Six years where the error was careless.
Twenty years where the behaviour was deliberate.
A separate 12-year assessment period may apply to certain offshore matters or offshore transfers, although using an overseas crypto exchange does not automatically make the underlying gains offshore.
Using an overseas exchange does not automatically make a crypto gain an offshore gain. HMRC generally treats exchange tokens without an underlying asset as located where their beneficial owner is resident.
For a UK resident, this will normally be the UK.
Don’t sign anything until you have checked your transactions properly.
HMRC has used certificates of tax position before, mainly in offshore campaigns. The CIOT has raised concerns about them, because they can be broad and cover several tax years. A voluntary certificate isn’t a tax return or a statutory notice, so you don’t generally have to sign one just because HMRC asks. You can write a letter instead, saying which years you’ve checked and attaching your evidence.
A portfolio that’s down overall can still owe tax. Sell Bitcoin at a profit and buy back later, and you may have a taxable gain even if the price then falls. Swapping one token for another usually counts as a disposal too. So check the actual trades, not what your portfolio is worth today.
Start by establishing whether tax is actually due. Do not rush into making a declaration before checking your records.
Be careful with messages asking you to click links, provide personal details or make payments.
HMRC will not ask for your wallet keys, seed phrases or passwords. If you are unsure whether a message is genuine, check it against HMRC's official GOV.UK guidance.
Check whether you have received a nudge letter, a formal enquiry or a statutory information notice.
Note the tax years mentioned and any response deadline. The type of correspondence determines how you should respond.
Collect your exchange statements, wallet histories, bank records and transaction details.
For most exchange tokens, UK Capital Gains Tax calculations use three matching rules in this order:
Same-day acquisitions.
Acquisitions within the following 30 days.
The Section 104 pool, which uses the pooled cost of the remaining tokens.
Applying these rules correctly is important. Exchange reports alone may not provide everything needed for an accurate calculation.
Capital losses generally need to be claimed within four years of the end of the tax year in which they arose.
For qualifying losses from 2022-23, the deadline is 5 April 2027.
This could matter to investors affected by the Terra and FTX failures. However, a collapse does not automatically create an allowable capital loss.
If you still own tokens that have become worthless or of negligible value, you may be able to make a negligible value claim, subject to HMRC's conditions.
Check when the loss actually arose and whether you qualify to claim it. Do not assume that every loss connected with Terra or FTX can be claimed in 2022-23.
Receiving an HMRC crypto letter does not mean you automatically owe tax. It means you should check your records and establish whether your tax position is correct.
Start with the type of letter and the years involved. Then calculate your gains and losses using the correct UK rules. If you find an error, choose the appropriate way to correct it and get advice if the situation is complicated.
Also check whether you have earlier capital losses that still need to be claimed, particularly those from 2022-23, for which the general deadline is 5 April 2027.
With CARF bringing more cryptoasset information to HMRC from 2026 onwards, accurate records will become even more important.
A letter from HMRC is a reason to check your tax position, not a reason to panic.
