HMRC Crypto Warning Letters: What to Do Next

An HMRC crypto warning letter, often called a nudge letter, asks you to check your tax position. It does not by itself prove that you owe tax. Read the instructions and deadline, gather your records, and establish what happened before choosing a response or correction route.

On 27 August 2026, HMRC published its first official statistics on taxable cryptoasset gains. It recorded 17,600 individuals with taxable crypto disposals in 2024/25 and £1.38 billion of gains. HMRC also estimated that its crypto compliance and education activity generated an additional £168 million of CGT that year. Read HMRC's 27 August release.

Start with the years named in the letter. Include the purchase history needed to explain disposals, even if those purchases happened earlier. Keep a copy of the letter and your calculations. If you are uncertain about a response, disclosure or penalty position, ask a qualified tax adviser.

HMRC may already hold exchange-side information obtained through older powers. Separately, in-scope providers began CARF due diligence, record keeping and data collection on 1 January 2026; their first standardised reports are due between 1 January and 31 May 2027. This guide keeps those two evidence sources separate and explains what to review before responding to a letter.

What are the warning letters?

HMRC uses "one to many" nudge-letter campaigns to ask groups of taxpayers to check a defined part of their tax position. A crypto letter may be informed by exchange-side or other records that HMRC already holds.

Do not treat every HMRC crypto email, text or app notification as proof of a personal discrepancy. HMRC also runs broad education campaigns. The document you received controls: check its sender, the years and activity it names, the questions it asks and its response date before deciding what it means for you.

What CARF changes, and when

On 1 January 2026, UK due diligence, record keeping and data collection began under the Crypto-Asset Reporting Framework (CARF). The OECD-designed framework applies to businesses that meet the definition of a reporting cryptoasset service provider; it is not a rule that every protocol or wallet reports directly to HMRC.

HMRC's current guidance says in-scope providers collect:

• name, date of birth, home address, and country of residence
• a National Insurance number or UTR for UK-resident individuals
• the value, cryptoasset type, transaction type, and number of units for transactions

Providers report relevant user details and transaction summaries. The first reports, covering 1 January to 31 December 2026, must be submitted between 1 January and 31 May 2027. That timetable does not mean HMRC already holds the first CARF report during the 2025/26 filing season.

What HMRC may hold now, and what CARF adds

The strongest current evidence of enforcement impact predates the first CARF report: HMRC estimates its existing crypto compliance and education activity generated £168 million of additional CGT in 2024/25. CARF adds a structured reporting source from 2027; it does not replace the need to establish the facts of an individual history.

What counts as a taxable event

Many investors assume they only owe tax when they "cash out" to GBP. That's wrong. HMRC treats all of the following as disposals that trigger Capital Gains Tax:

• Selling crypto for GBP or any fiat currency
• Swapping one crypto for another (including ETH → USDC)
• Paying for goods or services with crypto

Liquidity and liquid-staking positions are fact-specific. A disposal can arise where beneficial ownership transfers or the rights received are materially different; a different token is evidence to examine, not a conclusive rule by itself.

Note on bridging: Cross-chain bridges (e.g. ETH from Ethereum to Arbitrum) require a facts test. A same-owner, same-asset bridge can support basis carry where beneficial ownership and the token rights are preserved. A different token, changed rights, or incomplete destination evidence can point to a different result and should remain visible for review.

Additionally, staking rewards, airdrops, and mining receipts can create taxable miscellaneous or trading income, depending on how they were earned and the wider facts.

The penalties for getting it wrong

HMRC's penalty regime is tiered based on the severity of the error:

On top of penalties, HMRC charges daily interest on outstanding balances, plus late payment surcharges of 5% at 30 days, 6 months, and 12 months.

The applicable assessment period depends on the tax, filing history, behaviour, failure-to-notify rules and whether offshore matters are involved. Four-, six-, twelve- and twenty-year periods can arise in different circumstances, so do not choose a disclosure route from a simplified lookback table. As CARF data flowing from 2027, the structured data source will expand, but it does not determine the assessment period or penalty treatment by itself.

What to do before the deadline in your letter

1. Check if you have undeclared disposals. Crypto-to-crypto swaps are normally disposals. Liquidity and staking activity is fact-specific and can contain transfers, disposals, income, and fees. If you only reviewed GBP cash-outs, the history may be incomplete.
2. Gather your transaction history. Export data from every exchange and wallet you've used. For DeFi activity, you'll need on-chain data from block explorers, because exchange CSVs won't capture it.
3. Calculate your gains correctly. HMRC requires Section 104 pooling with same-day and 30-day bed-and-breakfast matching rules. A simple "bought at X, sold at Y" calculation is not sufficient. See our 2025/26 self-assessment filing guide → (or our complete 2024/25 guide for the now-closed year).
4. Separate income from capital gains. Staking rewards, airdrops, and LP fees can create income depending on the arrangement. Token disposals are considered separately for CGT. These can go on different parts of your self-assessment, and once your DeFi income is large enough, it can pull you into payments on account the following year. Read our staking tax guide →
5. Amend past returns if needed. You can amend a return within 12 months of the filing deadline. Beyond that, HMRC's Cryptoasset Disclosure Service may be relevant. The correct route and penalty treatment depend on the facts.
6. Don't ignore the letter. Use the response date printed on your letter. Ignoring it does not close the matter and may lead to further compliance action.

How to reply to the letter

Once you've recalculated your figures, the nudge letter resolves to one of three honest outcomes:

1. Your returns were right. If your recalculated gains match what you declared, reply by the deadline in the letter confirming you've reviewed your position and no amendment is needed. Keep the full calculation, because HMRC can ask how you reached it, and a Section 104 computation that shows its working is useful evidence to retain.
2. You under-declared, and the year is still amendable. You can amend a return within 12 months of its filing deadline, so a 2024/25 return filed online can be amended until 31 January 2027. Follow the amendment and payment process that applies to the facts and the letter. HMRC, not the software, decides whether further action is needed.
3. Older years are affected. Use HMRC's Cryptoasset Disclosure Service, and our voluntary disclosure guide explains the current GOV.UK process and evidence needed. Contact from HMRC can be relevant to whether a disclosure is prompted, but the position is fact-specific and should be checked before submitting. Do not wait for a formal enquiry.

The bigger picture

CARF is an international framework, but reporting depends on the provider, its jurisdiction, the user's tax residence and the participating countries. HMRC's current delivery plan targets exchange with participating jurisdictions by 30 September 2027.

HMRC already has exchange-side information and CARF will create a more structured reporting source. In-scope providers first report 2026 activity by 31 May 2027; the exact operational matching process is still developing.

The practical response is the same before and after CARF: assemble the complete history, apply the rules for each year, and keep material evidence gaps visible rather than forcing a confident answer.

Start with the basics: check whether you need to report crypto to HMRC at all, then make sure your Section 104 pool and exchange records agree.