HMRC has issued more than 65,000 warning letters to cryptocurrency investors over the past year amid concerns that some may have underpaid tax.
For the first time, HMRC has now published figures revealing the amount of taxable gains declared by crypto investors during its crackdown.
The latest data shows that 17,600 taxpayers declared a combined £1.38 billion in taxable cryptocurrency gains during the 2024/2025 tax year.
However, these gains have been significantly concentrated among a relatively small group of investors.
Around 900 taxpayers reported gains exceeding £250,000, accounting for approximately 70 per cent of the total £1.38 billion declared. On average, reported cryptocurrency gains were around £78,000.
These figures highlight just how significant cryptocurrency gains can be. However, HMRC believes there are still substantial amounts of undeclared gains that have yet to be reported.
HMRC has also raised concerns about younger crypto investors, many of whom may not realise that tax can become payable when cryptocurrency is sold, exchanged or otherwise disposed of.
If you hold or trade cryptocurrency, you may need to calculate your gains and income and report them to HMRC through a Self Assessment tax return.
It is important to remember that simply purchasing and holding cryptocurrency does not usually create a tax liability. Tax generally becomes relevant when you carry out a taxable transaction.
The two main types of tax that can apply are:
When calculating a Capital Gains Tax liability, you generally need to deduct the amount originally paid for the cryptocurrency, along with any allowable costs or fees, from its value when it is disposed of.
You will then generally only pay CGT on gains above the annual tax-free allowance, which is currently £3,000.
For basic-rate taxpayers, the CGT rate on relevant disposals is 18 per cent, while higher- and additional-rate taxpayers can pay CGT at 24 per cent.
If Income Tax applies to cryptocurrency you receive, you should establish the market value of the crypto on the date it was received.
This value is then treated as part of your income for the relevant tax year and taxed according to your Income Tax band.
For anyone investing in cryptocurrency, keeping accurate records of every transaction is essential. Having a clear record of purchases, sales, exchanges and other transactions can make it much easier to calculate exactly how much tax may be due.
Cryptocurrency tax can be complicated, and many investors may not realise that their crypto activity could create a tax liability.
Our team of accountants can provide support with your cryptocurrency tax affairs. We can help you understand which taxes may apply, calculate your potential liability and assist you with reporting and paying the tax owed to HMRC.
With HMRC increasing its focus on cryptocurrency investors, making sure your crypto tax affairs are up to date is more important than ever.
If you need support managing cryptocurrency tax, get in touch with our team!
