I Got an HMRC Crypto Nudge Letter — What to Do (UK Guide)

HMRC has been sending "nudge letters" to UK crypto holders since 2021, and the volume has steadily grown as exchanges share KYC data under the Crypto-Asset Reporting Framework (CARF). If you have received one — usually titled something like "Important information about your cryptoasset holdings" — do not ignore it, and do not panic.

What the nudge letter actually says

A nudge letter is not an assessment or a demand for tax. It is HMRC telling you they have reason to believe you hold crypto assets (typically because a UK-regulated exchange reported your account) and asking you to check whether you have correctly declared any disposals in your Self Assessment. The letter asks you to review your records, and if you owe tax, either amend a prior return or make a disclosure under the Digital Disclosure Service.

Why you received one

The most common triggers are exchange data sharing — UK exchanges like Coinbase, Kraken, Bitstamp, and others share customer data with HMRC — unusual deposit or withdrawal patterns flagged by banks, or disposals that were reported on a return without the supporting Section 104 workings. Receiving a letter does not mean HMRC believes you have done anything wrong; it means they want you to double-check.

Step one: gather your records

Pull every transaction from every exchange and every self-custody wallet you have used since you started holding crypto. HMRC's position is that records should be kept for at least five years after the 31 January filing deadline. If that is impractical because some exchanges have closed or lost your data, document your best-efforts reconstruction and keep that documentation as a defence.

Step two: calculate what you actually owe

The nudge letter does not tell you what you owe — that is your job to work out. You need disposals expressed in GBP, with Section 104 pooled cost bases, same-day and 30-day matching applied, staking and airdrop income separated from capital gains, and the correct tax year attribution. Doing this by hand for more than a handful of transactions is unrealistic; a specialist UK tool is far safer.

Step three: amend or disclose

If you filed a Self Assessment and under-reported, you can amend that return within 12 months of the original deadline. If you are outside the amendment window or never filed, use HMRC's Digital Disclosure Service. Voluntary disclosure gets you substantially lower penalties than waiting for HMRC to assess — penalties range from zero for reasonable care, up to 100% of the tax owed (or 200% for offshore matters) for deliberate concealment.

Penalties and interest

Interest accrues from the original payment due date at HMRC's official rate. Penalties depend on behaviour — careless, deliberate, or deliberate and concealed — and on whether the disclosure is prompted or unprompted. Telling HMRC before they tell you is always cheaper.

Should I get an accountant?

For very straightforward cases with a handful of disposals, self-calculation with a UK tax tool is fine. For larger portfolios, multi-year back-reporting, or anyone who has used DeFi, NFTs, or cross-border exchanges, speak to a crypto-literate UK accountant before responding. The cost is small compared with getting the disclosure wrong.

Responding to the letter

You must respond by the deadline stated on the letter, usually 30 days. Ignoring it is the worst option — HMRC escalates to a formal enquiry, and the penalty bracket moves from "prompted" to "HMRC initiated", which is materially worse.

CryptoLens can rebuild your full transaction history from any public wallet address and generate an HMRC-ready Capital Gains Tax summary across every UK tax year you have been active, which is the right starting point for any nudge-letter response.