Published by Adam Craggs, Partner, Head of Tax, Investigations & Financial Crime and Liam McKay, Of Counsel

Understanding the growing HMRC risk

HMRC’s latest published statistics show continued growth in both the number of taxpayers holding cryptoassets and associated tax receipts, making cryptoasset holders an increasingly prominent target for HMRC.

HMRC's statistics reveal, amongst other things, that in the 2024/25 tax year:

• 240 taxpayers reported more than £1 million in capital gains from cryptoassets, accounting for £717 million of cryptoasset gains between them, and
• 17,600 taxpayers made Capital Gains Tax liable disposals of cryptoassets (such as Bitcoin, Ethereum and Dogecoin), totalling £13.8 billion, with an average gain of £78,000 each.

Although cryptoassets have formed part of the UK economy for some time, HMRC’s approach to their taxation continues to evolve. The inherent complexity of cryptoassets, coupled with the wide range of tax issues they can create, means that understanding and meeting one’s obligations is not always straightforward. The result is an area increasingly ripe for HMRC scrutiny. Indeed, a recent BBC report revealed that HMRC had sent 81,000 letters to taxpayers in the previous year warning that they might owe Capital Gains Tax on their cryptoassets.

With the UK’s implementation of the Cryptoasset Reporting Framework (CARF) from January 2026, and HMRC set to receive data from cryptoasset service providers from 2027, the tax risks facing cryptoasset holders are increasing.

What should taxpayers do?

Taxpayers should ensure they understand the tax treatment of their cryptoasset activity, maintain detailed transaction records and ensure that all taxable income and gains arising from their cryptoasset activity have been correctly reported to HMRC. This is particularly important as HMRC gains access to more information from cryptoasset service providers and becomes better equipped to identify any discrepancies.

Taking prompt action can significantly reduce the risk of an HMRC intervention, limit potential interest and penalties, and help prevent matters from escalating. Where an error or omission is identified, early and carefully managed engagement with HMRC is often critical. In the most serious cases, particularly where HMRC suspects deliberate concealment, taxpayers may also face a criminal investigation.

Specialist professional advice should therefore be sought at the earliest opportunity. An experienced adviser can assess the position, quantify any potential exposure and manage appropriate disclosure or engagement with HMRC.

Contacts

Adam Craggs, Partner, Tax, Investigations and Financial Crime

+44 20 3060 6421 (UK) | adam.craggs@rpclegal.com

Formerly of HMRC's Solicitor's Office, Adam has more than 35 years' experience in direct and indirect tax. He has particular expertise in dealing with complex enquiries and tax litigation (both civil and criminal).

Adam is also an accredited mediator and has assisted a large number of clients reach a successful outcome through HMRC's Alternative Dispute Resolution process. He writes and lectures widely on tax matters and is the co-author of the best-selling “A Practical Guide to Tax Disputes” (now in its third edition). He has also written a number of guidance notes for Tolley's Online Guidance and PLC and edits various chapters in Whiteman & Sherry on Income Tax and Capital Gains Tax.

Adam was recognised as Lawyer of the Year – Tax and Trusts in the Spear's Wealth Management Awards 2021.

Adam has been ranked by Chambers and Legal 500 for the last 15 years and is a member of the International Fiscal Association and the Fraud Lawyers Association.

Liam McKay, Of Counsel, Tax, Investigations and Financial Crime 

+44 20 3060 6540 (UK) | liam.mckay@rpclegal.com

Liam McKay is Of Counsel and advises corporate and HNW individual clients on a wide range of contentious tax matters.

Liam is an experienced tax litigator and advises corporate and HNW clients on contentious tax matters across the spectrum of direct and indirect taxes, including public law challenges to HMRC decisions by way of judicial review proceedings.

Prior to joining RPC, Liam spent 7 years as a lawyer in a specialist litigation team in HMRC's Solicitor's Office, where he had conduct of high profile and complex tax litigation. Before moving to the UK, Liam was a Crown Counsel in New Zealand, advising and representing the New Zealand government in public law and litigation.