HMRC sent me a letter about my crypto, what should I do?

A crypto nudge letter tells you HMRC holds data suggesting you disposed of, or earned, cryptoassets it cannot match to your tax return. It is not an accusation, but it does mean HMRC expects a response.

Your first task is working out what actually happened across every wallet and exchange, then checking that against the correct tax treatment before deciding whether a disclosure is needed.

Exchanges increasingly share customer data with HMRC, both under UK information powers and through international exchange arrangements, which is why letters often arrive years after the transactions themselves.

HMRC's Cryptoassets Manual sets out its view of the tax treatment. Most disposals of cryptoassets by individuals are capital gains, taxed under the Taxation of Chargeable Gains Act 1992. Activities such as mining, staking rewards and some airdrops can instead be taxed as income.

Where tax is underpaid, standard time limits apply under the Taxes Management Act 1970, and penalties follow Schedule 24 Finance Act 2007 depending on whether the omission was careless or deliberate, and whether disclosure is prompted or unprompted.

If you hold cryptoassets personally, gains and income sit on your Self Assessment return, separate from your company accounts. Keep the two clearly apart when responding to HMRC.

If your company holds or trades cryptoassets itself, the tax treatment runs through corporation tax rules rather than personal capital gains rules, and needs separate specialist review.

Costs depend on how many transactions need reviewing and how far back records go. Crypto transaction histories can be complex, particularly across multiple exchanges and wallets, so professional reconciliation often pays for itself in avoided errors.

If the letter develops into a formal enquiry, tax investigation insurance included with our Growth plans covers professional representation costs — see /fees.

Do not ignore the letter because you think crypto is untraceable. Exchange data sharing makes most significant holdings visible to HMRC eventually.

Avoid treating every crypto-to-crypto trade as tax-free. Swapping one token for another is usually a disposal for capital gains purposes, not just cashing out to sterling.

Do not guess acquisition costs. Reconstruct actual transaction records from exchange exports wherever possible, since estimates invite HMRC challenge.