40% surge in UK crypto ownership spurs HMRC crackdown: What You Need to Know

The crypto scene in the UK is booming! A recent report revealed that crypto ownership in the UK has jumped by 40%, with around 12% of adults – roughly 7 million people – now holding crypto assets, up from 5 million in 2022.

While this signals growing adoption and interest in the cryptocurrency space, it also comes with a sharp increase in compliance activity from HM Revenue & Customs (HMRC). If you’re an investor, a trader, or running a crypto business, this isn’t just background noise – it’s something you need to act on. HMRC is stepping up its game, and if you’re not compliant, you could be facing some hefty penalties.

Let’s break it all down so you can understand what’s happening and what it means for you.

The rise of UK crypto ownership

Crypto adoption in the UK has been fueled by a wide range of factors:

• Increased awareness of blockchain and its potential.
• Easier access to cryptoasset exchanges and P2P exchanges.
• An increase in institutional involvement, with financial institutions now supporting crypto funds and trading platforms.

But as the flow of funds into crypto grows, it’s no surprise that the taxman is watching. HMRC has already ramped up its scrutiny, sending letters to both individual investors and crypto businesses urging them to review their tax filings.

This comes at a time when the government is tightening the screws on capital gains tax. Since 2024, the Capital Gains Tax allowance has dropped to just £3,000, making accurate reporting of your investment costs and taxable gains even more important.

HMRC’s compliance push: What you need to know

HMRC isn’t playing games when it comes to tracking down non-compliance in the cryptoasset sector. They have launched several initiatives, including:

‘Nudge’ letter campaigns

HMRC is sending out letters to those suspected of underreporting crypto gains. These letters encourage recipients to review their filings, disclose unreported income, and pay any owed taxes.

Using advanced tech

HMRC is working closely with crypto exchanges and using advanced analytics to monitor chain activity. By tracking the flow of funds, they hope to identify unreported crypto income and transactions tied to illicit activities.

The Crypto-Asset Reporting Framework (CARF)

This lets tax authorities worldwide exchange information about crypto transactions. HMRC will soon have access to global crypto data, leaving little room for error – or evasion.

Takeaway

Whether you’re trading on high-risk exchanges, using P2P exchanges, or holding assets in a wallet, HMRC’s tools and partnerships make it easier than ever for them to monitor activity.

Cracking down on illicit cryptocurrency use

As the market grows, regulators are also focusing on stopping illicit cryptocurrency activity. High-profile cases of criminal activity involving crypto – think scams, hacks, or laundering of illicit funds – have brought increased attention to high-risk exchanges and unregulated platforms.

Authorities are watching for:

• Illicit funds flowing through exchanges.
• Links between chain activity and criminal activity like fraud or tax evasion.
• Businesses operating without the necessary registrations or ignoring compliance requirements.

For legitimate users, this means more transparency and stricter rules. But for those engaging in illicit activities, the crackdown is becoming real.

The impact on crypto businesses and investors

HMRC’s focus on compliance isn’t just about individual people – crypto businesses are also in the spotlight. Cryptoasset exchanges and other platforms are being urged to step up their reporting and compliance systems. This isn’t cheap – operating costs for compliance and reporting can skyrocket, especially for smaller or mid-sized businesses.

For investors, the biggest concerns include:

• Accurate reporting of gains and losses – Failing to account for your investment costs or overestimating deductions can result in fines.
• Understanding your tax liabilities – Many investors don’t realise that even moving assets between wallets or exchanges can trigger taxable events.

Here’s the bottom line: If you’re trading or investing, make sure you have a solid system to track your activity and calculate your tax obligations.

How to stay ahead

Whether you’re an investor, trader, or crypto business owner, here’s how you can prepare:

Keep records of everything

Track your trades, withdrawals, deposits, and operating costs. Include details like transaction dates, amounts, and relevant fees. This will make calculating your taxes (and proving your compliance) much easier.

Choose the right tools

Use software that integrates with cryptoasset exchanges and wallets to automate your tracking. There are many platforms designed to handle the complexities of the cryptocurrency space while keeping you compliant.

Be proactive

Don’t wait for a letter from HMRC. Review your filings, disclose any unreported gains, and stay ahead of compliance deadlines

Get professional advice

Tax laws around crypto are evolving, and mistakes can be costly. Work with experts who understand the cryptoasset sector and the specifics of HMRC’s requirements.

Stay in control with Crypto Tax Degens today!

With HMRC ramping up its compliance activity, now is the time to protect your gains and make sure you’re fully compliant. At Crypto Tax Degens, we offer exclusive resources and expert support to help you tackle your crypto taxes and keep more of your gains.

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