HMRC, cryptoassets and the letters that follow

For a long time many people assumed cryptoassets sat outside the tax system, or that HMRC had no practical way of knowing who held them. Neither was ever quite true, and the second is becoming less true every year. HMRC has been writing to crypto investors since 2021, and from 1 January 2026 UK cryptoasset service providers have been collecting information about their users under the OECD’s Cryptoasset Reporting Framework, for reporting to HMRC.

This guide explains how crypto is taxed, what HMRC can now see, what a crypto letter from HMRC means, and how past gains can be put right.

How crypto is taxed

HMRC does not treat cryptoassets as money. For most individuals who buy and hold them as an investment, they are assets within capital gains tax.

Disposals are wider than “selling”

A capital gains tax event — a disposal — happens when you:

• sell crypto for pounds or another currency
• exchange one cryptoasset for another, including swaps into stablecoins
• use crypto to pay for goods or services
• give crypto away, other than to a spouse or civil partner

The second point catches many people out. Moving from one token to another is a disposal of the first at its market value, even though no money reaches a bank account.

Working out the gain

Each disposal is matched against acquisitions under set rules: first against tokens of the same kind bought on the same day, then against those bought in the following 30 days, and otherwise against a pooled average cost of that token. This is why exchange records and wallet histories matter: the gain cannot be worked out properly without the full history.

For 2026-27 the capital gains tax annual exempt amount is £3,000. Gains above it are taxed at 18% within the basic rate band and 24% above it. Losses can be set against gains, but only once they have been reported to HMRC, and there are time limits for doing so.

Even where no tax is due, disposals may need to be reported on a Self Assessment return — for example where total disposal proceeds in the year exceed £50,000.

When crypto is income instead

Some crypto receipts are income rather than capital, and are taxed at income tax rates. This can include:

• tokens received from mining or staking, depending on the facts
• certain airdrops, where something was done in return for them
• crypto received as pay from an employer, which also brings PAYE and National Insurance
• activity on a scale that amounts to a trade

The distinction between income and capital is one of the most frequently disputed points in crypto cases.

What HMRC can see

HMRC has several sources:

• Information from exchanges. HMRC has for some years used its information powers to obtain customer data from exchanges operating in the UK.
• The Cryptoasset Reporting Framework. From 1 January 2026, UK cryptoasset service providers must collect identifying details and transaction information for their users, with the first reports due to HMRC in 2027. Other countries adopting the framework will exchange equivalent information with HMRC about UK residents.
• Bank data. Transfers to and from exchanges appear in bank records that HMRC can obtain.
• The Self Assessment return itself, which now asks specifically about cryptoasset disposals.

The practical effect is that crypto activity which was once hard to trace is increasingly visible, including activity in past years.

Which crypto exchanges report to HMRC?

Under the Cryptoasset Reporting Framework, the duty falls on any reporting cryptoasset service provider with a UK connection. That covers the exchanges, brokers and apps offering crypto trading to UK customers, not only firms headquartered here. A platform based abroad reports to its own tax authority, and that information reaches HMRC where the country has adopted the framework. So the question to ask is less “does my exchange report to HMRC?” and more “is there any route by which this exchange’s records reach HMRC?”. For most mainstream platforms there is.

Can HMRC see my crypto wallet?

A self-custody wallet is not reported by anyone, because there is no service provider to report it. But every transfer between an exchange and a wallet is recorded at the exchange, and blockchain transactions themselves are public. A wallet that has ever received crypto from, or sent it to, an exchange account in your name can usually be connected to you. Moving crypto off an exchange does not take it out of view.

What a crypto letter from HMRC means

HMRC’s crypto letters have mostly been nudge letters: sent to people its data suggests hold or have disposed of cryptoassets, asking them to check their returns and correct anything missing. A nudge letter is not a formal enquiry, but it tells you HMRC holds data about you, and ignoring it is a poor option. Our guide to nudge letters and the certificate of tax position covers the choices in detail.

A letter opening a formal enquiry into a return, or an information notice asking for exchange statements and wallet records, is a different matter, with statutory deadlines. See our page on compliance checks and on identifying your HMRC letter.

Putting past crypto gains right

HMRC runs a cryptoasset disclosure route within its Digital Disclosure Service, for people who need to correct past years. The usual steps are the same as for any disclosure: establish the full history, work out which years are open and which behaviour applies, calculate the gains and any income, then notify HMRC and submit the disclosure and payment within the period notification starts.

How many years a disclosure needs to cover depends on why the gains were not reported — see our guide to how far back HMRC can investigate. Offshore exchanges can bring the longer offshore time limits and higher penalty ranges into play, which makes the scoping more important, not less.

Sources

• Taxation of Chargeable Gains Act 1992 (disposals, share identification and pooling rules as applied to cryptoassets)
• HMRC, Cryptoassets Manual (CRYPTO10000 onwards)
• The UK regulations implementing the OECD Cryptoasset Reporting Framework, in force from 1 January 2026
• HMRC, Digital Disclosure Service: cryptoasset disclosures

This guide is general information, not advice on any particular case.