The taxman has ramped up its crackdown on cryptocurrency investors suspected of tax evasion, This is Money can reveal.
Crypto traders thought to have underpaid taxes on their investments have been warned via a barrage of letters sent out by HM Revenue and Customs.
It has posted 81,000 warning letters to those suspected of underpaying tax in the past year – a 25 per cent increase on the 65,000 letters it sent in the previous year, according to a Freedom of Information request obtained by accountancy firm UHY Hacker Young.
Warnings may come in the form of a letter, text message or notification.
Tax authorities are expected to probe swathes of traders next year when it starts to receive telling transaction data from cryptocurrency exchanges.
But before these investigations are launched, the tax authority is sending the ‘nudge’ letters to urge crypto holders to declare unpaid tax.
More than 80,000 letters have been sent to investors urging them to cough up unpaid tax
The price of the most popular cryptocurrency, bitcoin, has softened recently, falling from around $117,000 a year ago to around $63,000 today.
But tax officials suspect there are large amounts of unpaid tax from the bull run crypto assets saw in the three years to October 2025.
Like any other asset, investors must pay capital gains tax on any profits they receive when they ‘dispose’ of their cryptocurrency.
This can be if you sell it, exchange it for a different type of crypto asset, use it to pay for goods or give it to another investor.
Everyone gets a £3,000 CGT-free allowance every tax year, but if your profit exceeds this then you must pay tax at 18 per cent for basic-rate taxpayers, and 24 per cent for everyone else.
Neela Chauhan, partner at UHY Hacker Young, says: ‘There is the 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.
‘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 number of tax investigations into crypto investors is set to soar next year as the department will receive data on traders from swathes of online crypto marketplaces.
Officials can currently ask UK cryptocurrency businesses for information about taxpayers.
But by the end of May they will receive data on UK residents from cryptocurrency exchanges in 52 different jurisdictions, including the Channel Islands, the Cayman Islands and Ireland, as well as the UK.
Information passed between officials will include an investor’s name, address, National Insurance number and full transaction records.
One year later, another 15 jurisdictions will start handing over information to HMRC.
Investors trying to dodge tax will then be probed by authorities, which will be armed with this data.
Ms Chauhan adds: ‘Once HMRC has this data then tax investigations into cryptocurrency investors will be like shooting fish in a barrel.’
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