If HMRC opens a crypto enquiry, it may ask you to explain transactions, provide records, and correct tax errors. A letter is not always a formal investigation, but ignoring it can make matters worse. Identify the contact type first, preserve available data, and check your activity before replying. This helps you meet deadlines without guessing.
A nudge letter asks you to review your tax position. A compliance check reviews a return. A Schedule 36 information notice formally requires information.
A Schedule 36 notice usually refers to Finance Act 2008 Schedule 36. It should call itself an information notice. It should state a deadline and explain appeal rights.
A valid Schedule 36 notice has legal force. It can lead to penalties if you do not comply. You may challenge an unreasonable request before the First-tier Tribunal (Tax Chamber).
The letter’s wording determines your legal duty.
| Contact type | Legal force | Usual action | Risk if ignored |
|---|
| Crypto nudge letter | Usually not a formal notice | Review returns and reply if asked | May lead to follow-up |
| Compliance check | HMRC review process | Confirm scope and give checked evidence | Wider review or assessment |
| Schedule 36 notice | Statutory information power | Comply, seek advice, or appeal if appropriate | Information penalties |
Why HMRC may question your crypto activity
HMRC may compare your Self Assessment return with exchange, bank, and blockchain data. Many crypto-to-crypto swaps are disposals, not simple transfers.
Data HMRC can compare with returns
HMRC may ask for exchange histories, wallet addresses, bank statements, and proof of purchase costs. It may also ask about staking rewards, mining income, airdrops, DeFi, NFTs, loans, and blockchain bridges.
Letter received → scope confirmed → records rebuilt → calculations checked → response sent → questions answered → agreement, assessment or closure.
HMRC can narrow a review when records support the figures. It can widen a review if replies reveal unexplained transactions or missing tax years.
Crypto activity can have different UK tax results. The result depends on what happened and why. Selling, swapping, or spending tokens will often count as a disposal for Capital Gains Tax.
This includes crypto-to-crypto disposals. Your own facts and any reliefs still matter. Staking, mining, some airdrops, and service rewards may instead face Income Tax.
Income is usually valued in pounds when received. Trading activity or work-related rewards may also involve National Insurance contributions. Think of each event as a separate receipt or sale.
A sound calculation separates capital transactions from income receipts. Do not treat every token movement as one taxable event on your Self Assessment return.
How to respond without worsening your position
A timely and accurate reply should answer the request. It should preserve evidence and separate taxable events from your own wallet transfers. This gives HMRC a clear account instead of guesses.
Preserve records before replying
Do not reply from memory alone. Save the letter, envelope, emails, exchange exports, wallet files, and bank statements. Keep the original files where possible.
The most frequent error here is sending a quick explanation before checking the transactions. An early guess can conflict with later evidence. That can make a simple review take longer.
Rebuild missing exchange and wallet data
Missing records do not remove your duty to make a reasonable tax calculation. Rebuild activity from bank entries, wallet software, blockchain explorers, old emails, and DeFi records. Mark each assumption clearly.
Take extra care if a closed platform cannot give a full export. State what is missing and how you reached each figure. Do not present an estimate as a known fact.
- Exchange CSVs: Get trade, deposit, withdrawal, and fee reports for every tax year.
- Wallet evidence: List addresses, transaction hashes, and transfers between wallets you control.
- Income events: Record dates and pound values for staking, mining, and relevant airdrops.
- DeFi and NFTs: Record swaps, liquidity moves, loan collateral, and NFT purchases or sales.
- Bank records: Match pound deposits and withdrawals to the relevant platform.
After an HMRC crypto letter arrives, record the date received. Identify whether it is a nudge letter, compliance check, or Schedule 36 information notice. Note every question and the deadline.
Build your response pack before giving explanations. Match exchange CSV reports, wallet addresses, bank statements, and blockchain evidence. Then separate your own wallet transfers from trades, income, and disposals.
If you cannot meet a deadline, contact HMRC before it expires. Explain which records you are getting. Ask for a specific extension in writing.
Keep copies of all crypto tax records and correspondence. Ignoring a valid notice can lead to HMRC information penalties. A supported request for more time is usually better than incomplete figures.
Correct errors before penalties grow
You may amend a return or disclose unpaid tax. The right route changes after HMRC makes contact.
Amend, disclose or answer the enquiry
A Self Assessment return can usually be amended only within the relevant amendment window. Once HMRC has opened an enquiry into that return, do not assume you can amend it alone. Give checked corrections and discuss the right route with the officer.
A nudge letter or other contact does not always block an amendment. It also does not settle HMRC’s concerns. The exact status of the letter matters.
This guidance is less relevant for generic marketing with no action request. It also may not fit if you have no UK tax exposure. Companies, trusts, offshore structures, suspected fraud, or urgent statutory notices may need tailored professional advice before you reply.
HMRC may review earlier tax years when legal rules and time limits allow. An assessment window is usually up to four years for an innocent error. It can be up to six years for carelessness.
The window can reach up to 20 years for deliberate loss of tax. The right rule depends on the facts and process. It does not depend only on the transaction’s age.
An HMRC crypto enquiry can grow when exchange data, bank flows, and blockchain records do not match a return. One unexplained withdrawal can lead to questions about other years. This is why a full timeline matters.
Penalties are not automatic or fixed. Reasonable care may mean no inaccuracy penalty. Careless, deliberate, and concealed conduct can bring higher penalty ranges.
Your disclosure and cooperation can affect the result.
What to do before you reply to HMRC
Before replying, identify the letter, save evidence, check figures, and prepare a clear record pack. An unsupported story can lengthen a compliance check and prompt more questions.
Write a short timeline for each tax year in question. Show pounds paid in, crypto bought, wallet transfers, rewards received, and coins sold. Think of it like matching receipts to a bank statement.
A common case involves coins moved between an exchange and a personal wallet. The transfer itself may not be taxable. The earlier sale or swap may still need reporting.
If records are incomplete, say so plainly and explain your method. A qualified tax adviser can help where sums are large or facts are unclear. Ask for help before sending figures that you cannot support.
If you have received an HMRC letter, first check whether it names a compliance check or Schedule 36. Then make a dated list of every requested record. If the deadline is close, ask HMRC in writing for more time before it passes.
For official background on compliance checks, see HM Revenue & Customs. If the letter concerns a company, trust, offshore structure, fraud, or an urgent notice, seek tailored advice before replying.
Questions & answers
Can HMRC check my crypto transactions?
Yes. HMRC can compare your return with exchange data, bank records, and blockchain activity. It may ask for earlier tax years when legal conditions allow.
Is an HMRC crypto nudge letter an enquiry?
No, not automatically. A nudge letter usually asks you to review your tax position. A formal enquiry or compliance check will state a clearer scope and information request.
What happens if i ignore a schedule 36 notice?
Ignoring a valid Schedule 36 information notice may lead to penalties under Finance Act 2009 Schedule 55. Seek advice quickly if the request seems too broad. Appeal rights and deadlines can be limited.
Yes, but the route depends on the tax year and HMRC’s contact. An amendment may still be possible. An open enquiry often needs a direct and supported reply to the compliance officer.
Do crypto-to-crypto swaps need to be reported?
Often, yes. Exchanging one cryptoasset for another can be a Capital Gains Tax disposal. This can apply even without pounds sterling or a bank withdrawal.
