Crypto Tax Investigations: What to Do If You Receive an HMRC Nudge Letter

In recent years, HMRC has ramped up its efforts to tackle unpaid tax on cryptoassets, and 2025 is no exception. With the rise of digital currencies like Bitcoin, Ethereum, and Solana, many UK taxpayers are receiving HMRC crypto “nudge letters” — a signal that your crypto activity is on their radar. 

If you’ve received a letter or suspect that your crypto investments could lead to a tax investigation, it’s crucial to understand your position and act quickly. 

What Is an HMRC Crypto Nudge Letter? 

A nudge letter is HMRC’s way of encouraging voluntary compliance. These letters are often triggered by data received from crypto exchanges under information-sharing agreements. The message is simple: HMRC knows you may have crypto holdings or disposals that weren’t declared — and they’re giving you a chance to come forward voluntarily. 

Common nudge letter phrases: 

• “We believe you may have disposed of cryptoassets.” 

• “You may need to pay Capital Gains Tax on your crypto transactions.” 

• “We encourage you to review your tax affairs.” 

Why Is HMRC Investigating Crypto Now? 

HMRC has invested heavily in data collection and compliance tools, including: 

• Information sharing from UK and international exchanges 

• AI-powered data analysis 

• Targeted compliance campaigns 

If you’ve used platforms like Coinbase, Binance, Kraken, or others, there’s a strong chance HMRC has access to that transaction data. 

What If You Haven’t Declared Crypto Gains? 

If you’ve sold, traded, gifted, or converted crypto — even from coin-to-coin — it may be a taxable event under UK rules. 

Common undeclared crypto activities include: 

• Selling crypto for fiat (e.g., GBP) 

• Trading one crypto for another 

• Using crypto to pay for goods/services 

• Receiving tokens from forks, airdrops, or staking 

If any of these apply and you haven’t reported them, you’re at risk of: 

• Penalties of up to 100% of unpaid tax 

• Late interest 

• Possible criminal investigation in severe cases 

Voluntary Disclosure: Your Best Option 

If you suspect you owe tax on crypto activity, consider making a voluntary tax disclosure before HMRC takes action. This can be done through the Digital Disclosure Service (DDS) and may significantly reduce penalties. 

You’ll need to: 

• Review and calculate past crypto activity (often with tools like Koinly or CoinTracking) 

• Determine tax owed for each year 

• Submit the disclosure and arrange payment 

Working with a specialist crypto tax accountant ensures accuracy, protects you from overpaying, and helps negotiate with HMRC if needed. 

Already Under Investigation? Don’t Panic 

If you’ve received a formal notice of investigation (e.g., under Code of Practice 8 or COP9), do not respond without professional advice. These are serious inquiries, and how you handle them can affect the outcome. 

We offer full support for: 

• HMRC crypto tax investigations 

• Voluntary crypto tax disclosures 

• Nudge letter responses 

• Backdated CGT and income tax reporting 

• Negotiating reduced penalties 

How We Can Help 

At www.mycryptotax.co.uk we specialise in helping crypto investors, traders, and high-net-worth individuals navigate HMRC compliance confidently. 

Whether you’ve received a nudge letter, are concerned about past transactions, or simply want to get ahead of the curve, we provide: 

• Full transaction review and reconciliation 

• Capital Gains and Income Tax calculations 

• Voluntary disclosure submissions 

• HMRC investigation defence and support 

Don’t Wait for HMRC to Come to You 

HMRC’s crypto compliance drive is only intensifying. If you’re unsure about your tax position, now is the time to act — voluntary disclosure is always better than being investigated. 

FAQ’s

DISCLAIMER

© My Accountancy Team 2025 All Rights Reserved – The above articles are provided for guidance only and may not cover your personal circumstances so you should not rely on them. It is important that you seek appropriate professional advice which takes into account your personal circumstances where you can provide the full facts of the case and all documents related to your case. My Accountancy Team Ltd t/a mycryptotax.co.uk, cannot be held responsible for the consequences of any action or the consequences of deciding not to act.