The United Kingdom’s HMRC is stepping up its investigations into cryptocurrency investors over suspected tax evasion, said leading national accountancy group UHY Hacker Young.
As per Neela Chauhan, Partner at UHY Hacker Young, that carried out the Freedom of Information (FOI) request to the revenue and customs department, in the last 12 months, HMRC has sent 81,000 warning letters to crypto investors that it suspects may have underpaid taxes up 25% from the 65,000 such letters that it sent in 2024.
“Those ‘nudge’ letters are sent to individuals that HMRC suspects have underpaid tax on cryptos, giving them the opportunity to approach HMRC and disclose underpaid tax before being investigated. The number of letters sent in 2023/24 was 27,714,” she remarked.
Although the prices of cryptocurrencies like Bitcoin and Ethereum have fallen since October 2025, HMRC suspects that there are still large amounts of unpaid capital gains from the bull run between December 2022 and October 2025.
“There is an expectation among tax authorities that cryptocurrency investment is rife with tax evasion. A lot of the traders are young, have had little previous exposure to HMRC, and often work under the assumption that HMRC has limited visibility over their activities,” Chauhan added further.
“The tax treatment of cryptocurrency in the UK is complex, and many individuals do not fully understand their reporting obligations or recognize when transactions give rise to taxable income or gains that must be disclosed to HMRC,” she noted.
“Crypto investors often forget that you may still have made a taxable gain even when you are swapping one cryptocurrency for another and might not be aware that the income you can earn by lending cryptocurrencies is taxable,” the senior official reiterated.
At present HMRC can make requests for information to UK-based cryptocurrency businesses about UK taxpayers.
“Many individuals assume that transactions undertaken through overseas exchanges fall outside the scope of HMRC’s reporting requirements, particularly where no UK bank account is involved. However, UK resident individuals are generally subject to UK tax on their worldwide income and gains, including profits arising from cryptocurrency transactions conducted through offshore platforms. As a result, taxpayers may inadvertently fail to report taxable gains or income simply because they do not appreciate that overseas exchanges do not remove their UK tax obligations,” Chauhan said.
The number of tax investigations into cryptocurrency traders is expected to increase dramatically next year. From May 31, 2027, HMRC will automatically start receiving full data on UK residents from cryptocurrency exchanges located in 52 different jurisdictions, including the Channel Islands, the Cayman Islands, Ireland, and Lichenstein.
A further 15 jurisdictions will start providing information to HMRC in 2028, including Singapore, Switzerland, and Gibraltar. This information will include the investor’s full transaction records, name, address, and National Insurance number.
“Once HMRC has this data, tax investigations into cryptocurrency investors will be straightforward,” Neela added.
With this data and some fairly basic AI-built software, HMRC will be able to build a comprehensive list of all cryptocurrency investors who are behind on their CGT or income tax. This will eliminate any uncertainty for HMRC’s tax investigations teams.
“HMRC has set up a disclosure service for crypto investors to disclose unpaid tax. If you approach HMRC through this facility before HMRC contacts you, then penalties would be capped at 30% of the unpaid tax. If you use this facility after being prompted by HMRC, then the penalties are in the range of 70%-100% of the unpaid tax,” she concluded.
Talking about the UHY Hacker Young Group, the latter has emerged as one of the United Kingdom’s leading accountancy networks with 91 partners and 720 professional staff working from 22 locations around the country.
The Group has created a reputation for itself by practicing integrity and reliability within the financial community, particularly with London’s stock markets, while also providing a wide range of accounting, tax, and business advisory services.