Surge in ‘Nudge’ Letters Revealed by FOIA
The United Kingdom’s tax authority, His Majesty’s Revenue and Customs (HMRC), has escalated its crackdown on crypto tax non-compliance, issuing approximately 65,000 “nudge” letters to individuals suspected of unpaid tax dues in the 2024-25 tax year. This marks a significant surge, more than double the 27,700 letters sent during the previous year.
According to a Financial Times report, this data was obtained through a Freedom of Information Act (FOIA) request filed by accountancy firm UHY Hacker Young. The data further revealed that 8,329 such letters were sent to crypto investors in the 2021-22 tax year, though none were issued the year after.
HMRC typically uses these letters as a final warning before initiating a formal tax investigation into individuals suspected of avoidance or evasion. Neela Chauhan, a partner at UHY Hacker Young, attributed the rising number of potential violations not just to a growing crypto user base, but primarily to investor ignorance.
“The tax rules surrounding crypto are quite complex and there’s now a volume of people who are trading in crypto and not understanding that even if they move from one coin to another it triggers capital gains tax,” Chauhan stated.
Chauhan also acknowledged that some investors received the letters because they are against the idea of paying capital gains tax. She predicts HMRC will intensify its crackdown in the coming years, noting that the agency is greatly enhancing its understanding and data collection, particularly from centralized crypto exchanges.
Andrew Park, a tax investigations partner at Price Bailey, called the move by HMRC “inevitable.” To avoid becoming a target, crypto holders are urged to maintain meticulous transaction records and report all due taxes on their annual self-assessment returns. Park also encouraged investors unsure of their obligations to consider self-reporting, as “unprompted disclosures attract a more benign treatment from HMRC—including lower penalties.”
FAQ 💡
- Why is HMRC sending crypto tax letters? HMRC suspects unpaid crypto taxes and issued 65,000 warning letters in 2024–25.
- What triggers a crypto tax liability in the UK? Even swapping one coin for another can trigger capital gains tax.
- How can UK crypto investors avoid penalties? Keep detailed records and report all crypto gains in your self-assessment return.
- Is self-reporting better than waiting? Yes—unprompted disclosures often lead to lower penalties from HMRC.
