The UK Inland Revenue has stepped up its scrutiny of crypto investors, doubling the number of warning letters sent to those suspected of under-declaring or evading tax on digital asset gains.
HM Revenue and Customs (HMRC) issued almost 65,000 letters in the 2024-25 tax year, up from 27,700 the year before, Financial Times reported on Friday, referring to data obtained under the Freedom of Information Act.
The letters, known as “encouragement letters,” are designed to encourage investors to voluntarily correct their tax returns before an official investigation is launched.
The sharp rise reflects HMRC’s increasing focus on crypto-related tax compliance. Over the past four years, the agency has sent more than 100,000 such letters, with activity accelerating as cryptocurrency adoption soared and asset prices soared.
Related: How to File Cryptocurrency Taxes in 2025 (US, UK, Germany Guide)
7 million UK adults own crypto
Financial Conduct Authority assessments that seven million UK adults now own crypto, up from around 10% (5 million) in 2022 or 4.4% (2.2 million) in 2021, showing growing interest.
“The tax rules around crypto are quite complex and there are now a large number of people trading crypto who don’t realize that even if they switch from one coin to another it triggers capital gains tax,” Neela Chauhan, a partner at UHY Hacker Young, who filed the FOI request, told the FT.
HMRC’s visibility in the market has improved dramatically. The agency now receives transaction data directly from major crypto exchanges and will gain automatic access to global exchange data from 2026 under the Organization for Economic Co-operation and Development (OECD) Crypto-Assets Reporting Framework (CARF).
Related: New York State Senator Proposes Crypto Mining Energy Use Tax
US lawmakers are considering tax exemptions for cryptocurrencies
US senators are exploring updates to crypto tax policy, including exempting small transactions from taxation and clarifying how investment rewards are treated.
During a Senate Finance Committee hearing earlier this month, lawmakers debated whether daily crypto payments should trigger capital gains taxes and how to fairly classify income generated from investment services. Coinbase’s Vice President of Taxation, Lawrence Zlatkin, called on Congress to adopt a de minimis exemption for crypto transactions under $300.
Meanwhile, South Korea’s National Tax Service (NTS) has also intensified its crackdown on cryptocurrency tax evasion, warning that even assets stored in cold wallets will be seized if linked to unpaid taxes.
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