HMRC describes a cryptocurrency (or crypto assets) as "cryptographically secured digital representations of value or contractual rights that can be transferred, stored and traded electronically". Put more simply, a cryptocurrency is a digital asset which can be used to pay for goods or services, or bought and sold at a profit or loss.

Received a letter from HMRC about your crypto? Or worried you might? Here’s what’s happening, what they know, and what you can do about it.

What does HMRC say about crypto?

HMRC treats crypto as property. They’ve published a detailed Cryptoassets Manual setting out the tax treatment, and they’ve been clear that buying and selling crypto usually amounts to investment activity subject to Capital Gains Tax.

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CARF: the game changer for 2026

From 1 January 2026, UK crypto exchanges must collect and report user data to HMRC under the Cryptoasset Reporting Framework (CARF). This is a big deal.

Exchanges will report your name, address, date of birth, tax residency, National Insurance number, and full transaction records. The first reports are due 31 May 2027, covering the 2026 calendar year.

What this means: HMRC will have an independent record of your crypto activity to compare against your self-assessment. Any discrepancies could trigger a nudge letter, an enquiry, or a formal investigation.

55–95% of UK crypto holders are non-compliant

If you haven’t declared crypto on past returns, you’re far from alone. But CARF means the window for painless voluntary disclosure is closing. Acting now is much better than waiting for HMRC to come to you.

Want to find out how Crypto trading is taxed? Check out our full crypto guides here.

What happens during an HMRC investigation?

If HMRC launches an investigation, they’ll typically ask you to complete a Statement of Assets and Liabilities. This covers all significant assets, and the form now includes a specific question about crypto.

Your statement is your responsibility and will be used to calculate any settlement. If HMRC contacts you, speak to an accountant or tax advisor immediately. Don’t ignore the correspondence.

Voluntary disclosure: get ahead of it

HMRC’s Cryptoasset Disclosure Service lets you make a voluntary ‘unprompted’ disclosure. The difference in penalties is significant:

Voluntary (unprompted): penalties up to 30%

Prompted (after HMRC contacts you): penalties of 70–100%+

Interest is charged from the original due date regardless. But capital losses for crypto can be claimed up to four years back, so getting compliant may also reduce your overall tax bill.

What’s a ‘nudge letter’?

A nudge letter is a reminder from HMRC to declare crypto on your tax return. It’s not a formal investigation, it’s a warning. But ignoring one can lead to a full enquiry.

If you receive a nudge letter, don’t panic. Speak to your accountant, set up Recap to calculate your tax position, and respond promptly.

FAQs

Can HMRC investigate my crypto holdings?

Yes. HMRC has been requesting data from exchanges since 2019 and has sent thousands of nudge letters. From 2026, CARF gives them automatic access to your transaction data.

What should I do if HMRC contacts me about crypto?

Speak to an accountant or advisor straight away. Don’t ignore the correspondence. Crunch works with Recap to help with crypto tax compliance.

Is it too late to declare past crypto activity?

No. HMRC’s voluntary disclosure route is still open, and you’ll receive significantly lower penalties for coming forward before they contact you.

The information provided in this article is for general informational purposes only and should not be construed as financial or tax advice. We recommend consulting with a qualified tax advisor or financial professional who can provide personalised advice tailored to your specific circumstances.

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