UK Tax Authority Intensifies Scrutiny of Crypto Sector with 65,000 “Nudge Letters”
HM Revenue & Customs (HMRC) has significantly increased its efforts to monitor the crypto sector, sending out 65,000 “nudge letters” to investors suspected of under-reporting or evading taxes on digital assets. This represents a 134% increase from the previous year, according to data obtained through a Freedom of Information Act request by accounting firm UHY Hacker Young, as reported by the Financial Times.
These letters are typically sent before a formal investigation begins, requesting that recipients review their documents and settle any outstanding debts. UHY partner Neela Chauhan noted that HMRC is utilizing data provided directly by crypto exchanges to identify potential cases of tax avoidance, highlighting the growing collaboration between regulatory bodies and crypto platforms.
Global Efforts to Track Crypto Tax Evaders
Tax authorities in the UK and India are leveraging data from stock exchanges to track down individuals suspected of evading taxes on crypto assets. In India, for instance, tax authorities are reportedly monitoring over 400 suspected crypto tax evaders using data shared by Binance. These efforts demonstrate the increasing use of international data sharing agreements to gain deeper insights into crypto activities.
From January 2026, HMRC will have even broader access to information through the Crypto-Assets Reporting Framework (CARF), a global initiative adopted by approximately 70 jurisdictions, including OECD members. Under CARF, exchanges will be required to report user and transaction data to national tax authorities, with initial submissions due by May 31, 2027.
UK Tax Rules for Crypto Assets
In the UK, most crypto assets are classified as investments, and any sale, exchange, or purchase made using crypto is considered a disposal subject to Capital Gains Tax (CGT). Acquiring cryptocurrencies through mining, staking, airdrops, or employment is treated as income and taxed separately. The latest adjustments have increased capital gains tax rates for disposals after October 30, 2024, to 18% for the basic rate and 24% for higher-rate taxpayers.
UK Appoints “Digital Markets Champion” to Oversee Blockchain Transition
The UK government is planning to appoint a “digital markets champion” to accelerate the country’s transition to a blockchain-based financial infrastructure, according to remarks by Business Secretary at the Treasury Lucy Rigby. This new official will coordinate private sector efforts to tokenize wholesale financial instruments and ensure innovations align with the country’s regulatory framework.
The initiative is part of the UK’s Wholesale Financial Markets Digital Strategy, which outlines plans to issue blockchain-based government bonds, known as “digital gilts,” under the DIGIT framework. Speaking at the Digital Assets Week conference in London, Rigby also announced the launch of the Dematerialization Market Action Taskforce, a new body focused on replacing paper-based stock certificates with digital records to increase market efficiency.
For more information on the UK tax authority’s efforts to monitor the crypto sector, visit https://cryptonews.com/news/uk-tax-authority-sends-65000-crypto-nudge-letters-to-suspected-tax-evaders/
