HMRC’s Growing Focus on Crypto and Digital Asset Income

In 2025, HM Revenue & Customs (HMRC) has intensified its focus on crypto tax compliance and the correct reporting of income from digital assets.
An increasing number of UK taxpayers have received letters, questionnaires, and compliance notices regarding undeclared crypto gains — confirming that cryptocurrency taxation has become a major enforcement priority.

According to industry data, over seven million people in the UK have used cryptocurrencies or blockchain-based financial platforms. Yet a large proportion of users are unaware that most crypto transactions are taxable events under Capital Gains Tax (CGT) or Income Tax rules.

Why HMRC Is Intensifying Crypto Compliance

As part of its “Closing the Tax Gap” strategy, HMRC has invested heavily in data analytics tools capable of identifying undeclared crypto transactions.
In 2025, the authority rolled out a new phase of its Cryptoasset Data Matching Programme, enabling it to cross-reference data from UK and overseas exchanges, banks, and fintech providers.

The UK also joined the Crypto-Asset Reporting Framework (CARF) — a new OECD-led system that allows automatic exchange of crypto transaction data between tax authorities worldwide.
This means HMRC can now see transactions from platforms based outside the UK, including decentralised exchanges (DeFi) and NFT marketplaces.

What HMRC Considers Taxable Crypto Activity

HMRC defines cryptoassets broadly, covering cryptocurrencies, tokens, and other blockchain-based instruments.
Tax obligations arise in several common situations:

1. Selling or exchanging cryptoassets – treated as a disposal subject to Capital Gains Tax (CGT).
2. Swapping one cryptocurrency for another – also considered a disposal for CGT purposes.
3. Receiving crypto for goods or services – taxed as income under Income Tax rules.
4. Mining, staking, or airdrops – may fall under either Income Tax or CGT, depending on the nature and frequency of activity.
5. Trading NFTs or in-game blockchain assets – increasingly monitored by HMRC’s compliance teams.

Each transaction must be recorded with details of the date, value in GBP, acquisition cost, and exchange rate on the day of the transaction.

Common Mistakes and Non-Compliance Risks

The recent surge in HMRC crypto inquiries is largely due to frequent reporting errors and omissions.
The most common mistakes include:

• failing to declare crypto-to-crypto swaps as taxable disposals,
• calculating gains in non-GBP currencies,
• underreporting acquisition costs,
• omitting transactions from overseas exchanges, and
• assuming crypto income is anonymous and exempt from tax.

HMRC treats these errors seriously — particularly where taxpayers failed to declare substantial gains. Penalties can reach 100% of the unpaid tax, and deliberate concealment may trigger criminal investigation.

Crypto Compliance Checks – The New Reality in 2025

Since early 2025, HMRC has been running Crypto Compliance Campaigns targeting undeclared digital asset income.
These initiatives typically include:

• sending “nudge letters” encouraging voluntary disclosure,
• launching compliance checks based on exchange data,
• using the Connect AI system to identify discrepancies, and
• working with blockchain analytics firms to trace suspicious activity.

Taxpayers who come forward voluntarily can often benefit from reduced penalties or avoid them entirely. HMRC encourages a “self-correction before enforcement” approach, rewarding those who disclose errors proactively.

Crypto and AML Obligations in the UK

Crypto tax compliance is now closely linked to Anti-Money Laundering (AML) regulations.
Under the Money Laundering Regulations 2017 (as amended), businesses dealing in digital assets — including exchanges, brokers, and advisory firms — must be registered with and supervised by the Financial Conduct Authority (FCA).

AML duties include:

• performing Know Your Customer (KYC) checks,
• monitoring transactions for unusual activity,
• submitting Suspicious Activity Reports (SARs) to the National Crime Agency (NCA), and
• maintaining detailed records for HMRC inspection.

For accountants, tax agents, and compliance professionals, this means enhanced scrutiny of clients who hold or trade in cryptoassets.

What to Do If You Receive an HMRC Crypto Letter

If HMRC contacts a taxpayer regarding crypto income, the best approach is transparency and quick action. Recommended steps include:

1. Do not ignore the letter. Failing to respond can escalate the issue into a formal investigation.
2. Gather full transaction history from exchanges, wallets, and bank accounts.
3. Convert all figures to GBP based on the market rate at the date of each transaction.
4. Calculate cost basis and capital gains accurately for each disposal.
5. Submit a voluntary disclosure if previous tax returns were incomplete or inaccurate.

Specialised crypto tax software (e.g., Koinly, CoinTracking, Accointing) can automate calculations using HMRC’s share pooling method, ensuring accuracy and compliance.

Evolving Reporting Standards and the Role of Advisors

The 2025 tax year marks a major step forward in the UK’s digital asset reporting framework.
HMRC has announced plans to introduce a dedicated cryptoasset income section within the Self Assessment tax return from 2026, making reporting more transparent and standardised.

Tax advisors and accountants should be prepared to:

• assist clients with multi-platform transaction records,
• explain distinctions between CGT and Income Tax,
• advise on tax-efficient holding strategies, and
• stay updated on international data-sharing agreements under the CARF initiative.

Professionals serving crypto investors must now combine tax expertise with understanding of blockchain technology and digital finance.

Best Practices for Crypto Tax Compliance

To stay compliant and minimise risk of HMRC penalties, taxpayers and advisors should follow these best practices:

• Record every transaction, including trades, swaps, and staking rewards.
• Update records regularly, ideally monthly, instead of waiting until year-end.
• Understand when CGT vs. Income Tax applies, especially for professional traders.
• Be transparent – voluntary corrections are always viewed more favourably than omissions.
• Follow HMRC’s latest guidance in the official Cryptoassets Manual and updates under the Economic Crime Act framework.

Conclusion

In 2025, HMRC has made it clear that crypto taxation and compliance are top enforcement priorities.
The expansion of international data sharing, AI-powered analytics, and dedicated crypto campaigns means that undeclared digital asset income will be increasingly difficult to hide.

For taxpayers and professionals alike, the message is simple:
maintain transparent records, understand how crypto gains are taxed, and act proactively to ensure full compliance.

The UK is entering a new era of digital asset taxation — and those who adapt early will avoid unnecessary penalties and build lasting financial credibility.