The United Kingdom’s tax authority, HM Revenue & Customs (HMRC), has intensified its scrutiny of cryptocurrency investors, issuing a significant number of warning letters in the 2024-25 tax year. According to data obtained under the Freedom of Information Act, HMRC sent out almost 65,000 letters, more than doubling the 27,700 letters sent in the previous year. These “nudge letters” aim to encourage investors to voluntarily correct their tax returns before formal investigations commence.
Crypto Tax Compliance Under the Microscope
The marked increase in warning letters reflects HMRC’s growing focus on crypto-related tax compliance. Over the past four years, the agency has issued over 100,000 such letters, with activity escalating as cryptocurrency adoption and asset prices rise. This trend is indicative of the authority’s determination to ensure taxpayers are meeting their obligations regarding digital assets.
The Financial Conduct Authority estimates that approximately seven million adults in the UK now own cryptocurrency, up from around 10% (5 million) in 2022 or 4.4% (2.2 million) in 2021. This growing interest in cryptocurrency has led to increased complexity in tax reporting, as highlighted by Neela Chauhan, partner at UHY Hacker Young, who noted that “the tax rules around cryptocurrencies are quite complex and there are now a lot of people trading cryptocurrencies who don’t understand that even if they switch from one coin to another, it triggers capital gains tax.”
Example of a previous nudge letter from 2024. Source: kc-usercontent
Global Regulatory Landscape
HMRC’s visibility in the market has improved significantly, with the agency now receiving transaction data directly from major crypto exchanges. Furthermore, starting in 2026, HMRC will have automatic access to global exchange data under the Organization for Economic Co-operation and Development (OECD) Crypto-Assets Reporting Framework (CARF). This increased access to information will enable more effective monitoring and enforcement of tax compliance.
In the United States, lawmakers are considering updates to crypto tax policy, including exempting small transactions from taxation and clarifying the treatment of staking rewards. During a recent Senate Finance Committee hearing, the issue of whether everyday crypto payments should trigger a capital gains tax was debated, along with the classification of income from staking services. Lawrence Zlatkin, vice president of tax at Coinbase, advocated for a de minimis exemption for crypto transactions under $300.
International Crackdown on Crypto Tax Evasion
South Korea’s National Tax Service (NTS) has also intensified its efforts to combat crypto tax evasion, warning that assets stored in cold wallets will be confiscated if linked to unpaid taxes. This global trend of increased scrutiny and enforcement underscores the importance of taxpayers ensuring they are in compliance with all relevant tax laws and regulations regarding their cryptocurrency holdings.
For more information on navigating the complex landscape of crypto taxation, readers can refer to the guide How to File Crypto Taxes in 2025 (Guide for US, UK and Germany). Additionally, the article New York State Senator Proposes Tax on Energy Use in Crypto Mining provides insight into proposed regulatory changes in the US.
