CRYPTO ASSET DISCLOSURE
Invested in Bitcoin, Ethereum, or other digital assets? HMRC now receives data directly from crypto platforms — and is actively pursuing individuals who have not declared their gains or income.
Does HMRC Tax Crypto Assets?
Yes. HMRC treats most cryptocurrency transactions as subject to Capital Gains Tax (CGT), and in some cases Income Tax. If you have made a profit from buying and selling crypto assets and have not declared this on your Self Assessment return, you may have an outstanding tax liability.
Many investors are unaware that a 'disposal' for tax purposes is not limited to converting crypto to cash. The following are all treated as taxable disposals by HMRC:
Common Reasons HMRC Sends Nudge Letters
Selling crypto for sterling or another currency
Exchanging one cryptocurrency for another (e.g., Bitcoin for Ethereum)
Using cryptocurrency to pay for goods or services
Gifting crypto assets to someone other than a spouse or civil partner
Mining, staking rewards, and airdrops — which may be treated as income
If any of the above applies to you and you have not declared it,
HMRC may already have the data to identify this.
How Does HMRC Know About My Crypto?
This is a question we are asked frequently. The answer is that HMRC has been systematically collecting data from UK-based and international cryptocurrency exchanges since 2019. Under information-sharing arrangements, exchanges are required to report customer transaction data to HMRC. If you have used a major platform such as Coinbase, Binance, or Kraken, it is highly likely that HMRC already has details of your transactions.
HMRC's Connect system then cross-references this data against Self Assessment returns. If no crypto gains have been declared, a nudge letter — or a formal compliance check — can follow.
What Should You Do?
If you have undeclared crypto gains or income from previous years, the best course of action is to make a voluntary disclosure before HMRC contacts you. This will significantly reduce the penalties you face and allows you to control the process.
The disclosure route will depend on your circumstances:
For UK-based crypto gains — the Digital Disclosure Service (DDS) is typically the appropriate route
For offshore exchanges or international crypto holdings — the Worldwide Disclosure Facility (WDF) may be required
For cases involving deliberate non-declaration — the Contractual Disclosure Facility (CDF) may be relevant
Calculating Crypto Tax — Why You Need Professional Help
Once HMRC opens a formal compliance check, your disclosure is no longer considered voluntary. This means higher penalties, less flexibility, and a more adversarial process. Acting promptly after receiving a nudge letter is almost always the most cost-effective approach.
Free Initial Consultation
•Identifying the correct acquisition costs using HMRC's share pooling rules •Accounting for the 30-day same asset rule •Valuing transactions that were made in non-sterling currencies at the point of disposal •Separating income-type receipts (staking, mining) from capital gains •Tracking transactions across wallets and exchanges where records may be incomplete
How We Help
•We review your transaction history across all platforms and wallets •We calculate your capital gains and income exposure correctly using HMRC's rules •We advise on the appropriate disclosure route for your circumstances •We prepare and submit your disclosure to HMRC •We handle all correspondence with HMRC throughout the process •We help you set up a compliant system for reporting crypto going forward
Undeclared Crypto Gains?
Act Now.
HMRC's crypto compliance activity is increasing every year. The earlier you come forward, the lower your penalties. Contact our Cardiff office for a confidential consultation — we will assess your position and advise on the best course of action.
