Do you pay tax on cryptoassets? How to report and pay it

HMRC's Crypto Crackdown Intensifies as Enforcement Letters Surge Past 81,000

Almost one in ten people in the UK now own cryptoassets, yet HM Revenue & Customs (HMRC) suspects tens of thousands of investors are failing to pay the correct amount of tax, according to new figures. The tax authority has sharply escalated its enforcement efforts, dispatching a record number of warning letters to crypto investors over the past year.

Data obtained through a Freedom of Information request by accountancy firm UHY Hacker Young reveals that HMRC sent 81,172 warning letters in the 2025/26 fiscal year, a near threefold increase from the 27,714 letters sent two years prior. The latest figures reflect a continuation of a rising trend, with 65,000 letters sent in 2024/25. The dramatic increase signals a significant step-up in HMRC's oversight of the crypto sector.

"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," said Neela Chauhan, a partner at UHY Hacker Young. She added that the tax treatment of cryptocurrency is complex, and many individuals do not fully understand their reporting obligations or recognize when transactions give rise to taxable income or gains.

The enforcement push comes as crypto adoption in the UK has doubled in recent years. According to the Financial Conduct Authority (FCA), 8% of UK adults held cryptoassets in 2025, up from 4% in 2021. The demographic skews younger, with the FCA reporting that 15% of 18-34 year-olds own cryptoassets, compared with 9% of those aged 35-54.

Understanding Your Tax Obligations

For UK taxpayers, the key tax applies to disposing of cryptoassets, which can trigger capital gains tax (CGT). Disposal includes selling crypto for fiat currency, exchanging one cryptocurrency for another, using it to pay for goods or services, or gifting it to another person (with some exceptions for spouses, civil partners, or charities).

Each individual has an annual CGT allowance of £3,000, and while the 31 January deadline for submitting tax returns and the 31 December reporting deadline for some investors may seem distant, Chauhan advises caution: "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."

Investors may also be liable for income tax on certain crypto-related activities, including mining, staking, airdrops, and employment income. A £1,000 allowance applies to trading or miscellaneous income, though rules can vary. Gains can be reported via self-assessment or through HMRC's Real Time Capital Gains Tax Service.

The FCA's research suggests that many investors may be unaware of these obligations, and with HMRC's increasing willingness to use data from exchanges and other sources, the risk of detection is growing. Chauhan emphasizes, "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."

As HMRC ramps up its enforcement activity, the message is clear: crypto investors need to stay informed about their tax duties or risk falling afoul of the authorities.