HMRC has sent more than 81,000 warning letters to crypto holders over possible unpaid capital gains tax, nearly triple the number since 2024. The letters are prompts, not penalties, but ignoring them can lead to penalties or prosecution. Crypto disposals, including token-to-token swaps, may trigger capital gains tax.
TL;DR · LAST REVIEWED 20 AUGUST 2026
- HMRC sent 81,000 crypto tax warning letters, up from 65,000 last year.
- Letters are prompts, not penalties, but ignoring them can lead to penalties or prosecution.
- Crypto disposals, including token-to-token swaps, may trigger capital gains tax.
- Capital gains tax rates are 18% and 24% above the 3,000 pound exempt amount.
- From January 2026, HMRC gets automatic data from crypto platforms in 70 jurisdictions.
KEY FACTS
- 81,000 warning letters sent in the past year.
- 65,000 letters sent the previous year.
- 18% capital gains tax rate for basic-rate taxpayers.
- 24% capital gains tax rate for higher-rate taxpayers.
- 3,000 pounds annual exempt amount for 2026/27.
A nudge letter does not confirm you owe tax, but it should not be ignored. If you are unsure whether a disposal created a gain, check HMRC's cryptoassets manual or take advice from a qualified tax adviser before the next Self Assessment deadline.
What the letters are and why HMRC is sending them
HMRC has sent more than 81,000 warning letters to crypto holders in the past year, almost triple the number issued since 2024. These are nudge letters, not penalties, designed to prompt you to check and correct your tax position before HMRC opens a formal investigation. A further wave is scheduled from July 2026 to March 2027.
The letters are part of a targeted campaign to encourage voluntary compliance among people who may have unpaid capital gains tax on cryptoassets. They ask recipients to review their transactions and, where necessary, amend their tax returns or make a disclosure. Receiving a letter does not mean you have done something wrong, but it does signal that HMRC has identified you as a potential risk.
Ignoring the letter is not advisable. If HMRC subsequently finds that you owe tax, you could face penalties on top of the tax due. In extreme cases, where there is evidence of deliberate non-compliance, prosecution is possible. The letters themselves carry no penalty, but they are a clear prompt to act.
The scale of the mailing reflects the growing number of UK residents holding cryptoassets. HMRC has access to data from UK exchanges and can cross-reference this with bank records and tax returns. The letters are a low-cost way for HMRC to encourage people to put their affairs in order before more formal action begins.
When crypto is actually taxable
Selling crypto for money, or swapping one token for another, counts as a disposal for capital gains tax. Token-to-token swaps are a common blind spot: a gain can arise even without cashing out to pounds. Earning crypto through mining, staking, airdrops or as employment income is taxed as income instead.
Capital gains tax applies when you dispose of an asset and make a gain. For crypto, a disposal includes selling tokens for pounds, exchanging one token for another, or using crypto to pay for goods or services. Each disposal is a separate event, and you must calculate the gain or loss for each one.
Token-to-token swaps are frequently misunderstood. Many people assume that no tax is due until they convert crypto back into fiat currency. In practice, swapping Bitcoin for Ethereum, for example, is a disposal of Bitcoin at its market value at the time of the swap. A gain or loss arises immediately, even though no cash has changed hands.
Income tax applies to crypto received through mining, staking, airdrops or as payment for work. This is treated as income and taxed at your marginal rate, with National Insurance contributions potentially due if it is from employment. The distinction matters: capital gains tax rates are lower than income tax rates for higher earners, so getting the classification wrong can lead to underpayment.
How much tax you might owe
Capital gains tax on crypto is charged at 18% for basic-rate taxpayers and 24% for higher-rate taxpayers on gains above the annual exempt amount. The annual exempt amount is 3,000 pounds for 2026/27. Gains are worked out per disposal, using allowable costs and the share-pooling rules for the same token.
The rate you pay depends on your total taxable income for the year. If your income and gains together keep you within the basic-rate band, you pay 18% on the gain. If you are a higher-rate or additional-rate taxpayer, you pay 24%. The annual exempt amount of 3,000 pounds means you only pay tax on gains above this threshold in a tax year.
Calculating gains is not simply a matter of subtracting what you paid from what you sold for. You must use the share-pooling rules, which average out the cost of all holdings of the same token. This prevents you from cherry-picking the most expensive purchases to reduce a gain. Allowable costs include transaction fees and some other incidental costs directly related to the acquisition or disposal.
Losses can be offset against gains in the same tax year, and unused losses can be carried forward to future years. However, you must report losses to HMRC within four years of the end of the tax year in which they arose if you want to use them later. Keeping accurate records of every transaction is essential to calculating gains correctly.
What to do if you receive a letter
Do not ignore it: review your disposals and work out whether a gain arose. Report gains through Self Assessment; the online filing deadline is 31 January after the end of the tax year. Keep detailed records of purchases, sales, swaps and transfers, and take advice for complex positions.
The first step is to gather your transaction history from every exchange and wallet you have used. You need to identify all disposals, including token-to-token swaps, and calculate the gain or loss for each one. If your total gains exceed the annual exempt amount, you must report them on your Self Assessment tax return.
If you have already filed a return and did not include crypto gains, you may need to amend it. HMRC allows you to amend a return within 12 months of the filing deadline. If the deadline has passed, you should make a voluntary disclosure to HMRC, which may reduce any penalties compared with waiting for HMRC to contact you.
For complex situations, such as large portfolios, multiple exchanges, or crypto received through mining or staking, professional advice is worth considering. An accountant or tax adviser can help you apply the pooling rules correctly and ensure you claim all allowable costs. They can also handle correspondence with HMRC on your behalf.
Keep records for at least six years after the end of the tax year to which they relate. This includes dates of transactions, values in pounds at the time, bank statements, and any correspondence with exchanges. Good records make it easier to respond to any further questions from HMRC and to calculate gains accurately in future years.
Why HMRC visibility is increasing
HMRC already obtains data from UK-based crypto exchanges and can trace activity to UK bank accounts. From January 2026 the Crypto-Asset Reporting Framework shares data across around 70 jurisdictions. This makes undeclared gains progressively harder to keep out of view.
HMRC has had the power to require UK exchanges to report customer data for several years. This includes names, addresses, and transaction details. HMRC can match this information against tax returns to identify people who have not declared gains. It can also trace movements between crypto exchanges and UK bank accounts to build a picture of activity.
The Crypto-Asset Reporting Framework, which takes effect from January 2026, extends this visibility internationally. Around 70 jurisdictions have agreed to share data on crypto holdings and transactions automatically. This means that UK residents using exchanges based overseas will have their activity reported to HMRC, even if they never use a UK platform.
The combination of domestic and international data makes it increasingly difficult to hide crypto gains. HMRC is also investing in analytical tools to identify patterns of behaviour that suggest undeclared income or gains. The nudge letters are one part of a broader strategy to increase compliance through a mix of education, data, and enforcement.
For taxpayers, the message is clear: the information gap is closing. If you hold crypto and have made disposals, you should assume HMRC can see your activity. The safest approach is to review your position now, before the next wave of letters arrives, and correct any errors before they become the subject of an investigation.
RELATED GUIDES
DISCLAIMER
This article is for general information only and does not constitute financial, legal or tax advice. Figures are accurate as at publication and can change. Check the primary source or a qualified professional before acting.
Frequently asked questions
Why has HMRC sent 81,000 crypto tax letters?
HMRC sent more than 81,000 nudge letters over suspected unpaid capital gains tax on crypto, almost triple the number since 2024, prompting holders to check their returns.
Do I pay tax when I swap one crypto for another?
Yes; swapping one token for another is a disposal for capital gains tax, so a gain can arise even without converting to pounds.
What is the capital gains tax rate on crypto?
18% for basic-rate taxpayers and 24% for higher-rate taxpayers, on gains above the annual exempt amount of 3,000 pounds for 2026/27.
What happens if I ignore an HMRC crypto letter?
The letter carries no penalty, but if HMRC later finds unreported gains you can face penalties, and prosecution in extreme cases.
How do I report crypto gains?
Through Self Assessment; the deadline for online returns is 31 January after the end of the tax year.
SOURCES
- GOV.UK: tax on cryptoassets – accessed 2026-08-20
- GOV.UK: Capital Gains Tax – accessed 2026-08-20
- HMRC: Cryptoassets Manual – accessed 2026-08-20
