The UK's HM Revenue & Customs (HMRC) has doubled the number of warning letters sent to crypto investors suspected of tax evasion. In the 2024-25 tax year, nearly 65,000 such letters were issued, up from 27,700 the previous year. These 'nudge letters' encourage voluntary compliance to avoid penalties.
HM Revenue & Customs (HMRC), the UK's tax authority, has intensified its efforts to ensure compliance among cryptocurrency holders. According to data obtained under the Freedom of Information Act and reported by the Financial Times, HMRC sent close to 65,000 warning letters in the active tax year 2024-25. This marks a significant increase from the 27,700 letters dispatched the previous year, signaling a major crackdown on undeclared digital asset gains and income.
These letters, informally known as 'nudge letters,' are targeted at individuals suspected of not properly reporting their crypto income or gains from digital assets. Their purpose is to urge taxpayers to voluntarily rectify their tax returns before formal investigations begin, thereby avoiding higher penalties. HMRC emphasizes that crypto gains are not exempt from tax, countering any misconceptions among investors.
This escalation is part of a broader regulatory push in the UK to combat financial crime in the crypto sector. The government has proposed stricter anti-money laundering (AML) rules for crypto firms, aligning with European efforts. These proposals include reducing the reporting threshold for significant changes in firm control to enhance transparency in ownership structures. Additionally, new HMRC reporting requirements are being implemented as part of the international Cryptoasset Reporting Framework (CARF).
Investors are advised to review their tax positions promptly to comply with these rules. The increased scrutiny underscores HMRC's commitment to regulating digital asset transactions.