An HMRC nudge letter about crypto isn't a tax bill, an accusation, or the start of a formal investigation. It's a prompt. HMRC holds information suggesting you've held or disposed of cryptoassets, it has compared that against what you declared, and it's giving you a window to put things right yourself before it comes and does it for you.
You're not in trouble yet. The letter will state its own deadline, so read it and write that date down. What you must not do is ignore it. An unanswered nudge letter is a strong candidate for becoming a formal enquiry, and the gap between those two things, in cost and in stress, is enormous.
What follows is general information, not tax advice. If you think there's meaningful unpaid tax, get a qualified adviser involved before you write back.
What a nudge letter actually is
It's a "one to many" letter. HMRC identifies a group of taxpayers who may have underdeclared something, and sends them all the same standardised prompt. It's used across offshore income, property, undeclared side income, and for several years now, crypto.
The important word is prompt. HMRC isn't saying "you owe us £X". It's saying "our data suggests you may have a filing obligation you haven't met, go and check". Plenty of recipients check and find they owe nothing. Telling HMRC exactly that is a perfectly good response.
What does HMRC know?
More than most people assume, and it's only going one way.
HMRC has pulled data straight from crypto exchanges. It can issue information notices to platforms operating in the UK, requiring customer records: names, addresses, transaction history. Several large exchanges have complied. The letters people receive tend to correlate suspiciously well with having held an account at one particular platform.
Bigger picture, the reporting is being formalised. The UK is implementing the OECD's Crypto-Asset Reporting Framework, which obliges crypto service providers to collect user and transaction data and report it to tax authorities, with that data then exchanged between participating countries. Exchange data reaching HMRC stops being a bespoke request and becomes routine. Check gov.uk for current dates and scope, because implementation timelines have shifted more than once.
Here's what HMRC generally doesn't have: your cost basis. Exchange data tells them you disposed of something, and usually for how much. It says nothing about what you paid for it, especially if you bought it somewhere else entirely. Hold that thought.
Do you actually owe anything?
Maybe not. Work through this honestly before you panic.
Disposals are broader than "sold for pounds." HMRC counts selling crypto for fiat, trading one crypto for another, spending crypto on goods or services, and gifting it to anyone other than your spouse or civil partner. Crypto-to-crypto is the single most common reason someone sincerely believed they owed nothing and was wrong. Swapped ETH for SOL? You disposed of the ETH.
The annual exempt amount has collapsed. £12,300, then £6,000 for 2023/24, then £3,000 for 2024/25. Activity that sat comfortably inside the allowance a few years ago may not now.
There's a proceeds threshold, separate from gains. You can be required to report even with no tax to pay, if total disposal proceeds exceed four times the annual exempt amount. At a £3,000 allowance, that trips at £12,000 of proceeds. Proceeds, not profit. Sell and rebuy the same £2,000 of BTC six times and you're there without making a penny.
Some crypto income is income. Staking rewards, mining, airdrops received in return for something, crypto received as payment: generally taxed as income at your marginal rate, and calculated separately from capital gains.
If you get to the end of that list with nothing to declare, say so. If you don't, keep reading.
What a proper response needs
Two things. Only one of them is hard.
A computation. Gains and losses per tax year, done HMRC's way. Section 104 pooling, with the same-day rule applied first, then the 30-day bed and breakfast rule, and only then the pooled average cost. Everything you hold of one asset pools together regardless of where it sits. Your Bitcoin on Coinbase and your Bitcoin on Kraken are one pool.
The records behind it. HMRC doesn't just want a number. It wants to see where the number came from: acquisition dates, acquisition costs, disposal dates, disposal proceeds, fee treatment. A figure you can't evidence is a figure that invites questions.
The computation is mechanical. Software does it. The records are where people fall apart, because the true position of most people opening one of these letters is: I don't have complete records anymore. The exchange closed. The CSV export only reaches back two years. The wallet moved across three devices. Nobody kept a spreadsheet in 2021, because nobody thought they'd ever need one.
The disclosure route
If you find unpaid tax, tell HMRC. Don't quietly amend an old return and hope nobody looks. HMRC runs disclosure facilities for exactly this situation, including a route intended for unpaid tax on cryptoassets, and using the right one matters for how your case gets handled. Check current gov.uk guidance, or let an adviser pick the route, because these facilities and their names change.
Two things worth understanding about disclosure in general.
The time limits reach back further than you'd like. HMRC's assessment windows depend on behaviour, and they stretch considerably where the behaviour is judged careless or deliberate rather than an innocent mistake. "I didn't know crypto was taxable" and "I knew and said nothing" are treated very differently, and the difference is measured in years and in penalty percentages.
Coming forward beats being caught. Penalties get reduced for disclosure and cooperation, and reduced further where the disclosure is unprompted. A nudge letter makes any subsequent disclosure a prompted one, which is another reason not to sit on it. Every week you wait, your cooperation looks thinner and nothing about your position improves.
This is where a qualified adviser earns the fee. The calculation is one thing. Choosing the right disclosure route, characterising the behaviour, and arguing the penalty position isn't something to improvise off a blog post.
The real bottleneck: records you no longer have
Strip out the anxiety and the problem under a crypto nudge letter is almost always the same one. You need a defensible transaction history covering several years, across venues that no longer exist, wallets you barely remember, and DeFi activity nobody reported to anyone. And it has to hold together well enough that every disposal has a cost basis attached and every transfer between your own accounts is recognised as a transfer rather than a sale.
That's reconstruction work. Pulling on-chain history by address across every chain you touched. Matching withdrawals to deposits by timestamp and amount so internal movements don't get taxed as disposals. Recovering what's recoverable from dead exchanges. Using bank records to evidence the fiat that went in. Where a record is genuinely gone, arriving at a defensible cost basis by a documented method rather than a guess, and writing down why. We've set out the full methodology here.
Consumer tax software mostly doesn't do this. It imports what it can and hands you back a list of errors: missing cost basis, unmatched transfer, unknown transaction. On an ordinary Tuesday that's annoying. With an HMRC deadline on the mantelpiece it's something else.
Where we fit
Moonscape's crypto tax rescue exists for this exact file. Show us the mess and the first thing you get back is a free diagnostic scan: how many transactions we found, how many missing cost bases, how many unmatched transfers, how many tax years are affected. Numbers, from your own data, in about two business days. Keep the report either way.
If you want it fixed, the quote is fixed off those numbers, from £499. What comes back is a filing-ready computation for each affected year, SA108 and an HMRC-ready gains summary, a full categorised transaction log, and a line-by-line audit trail showing how every figure was reached. The audit trail is the part that matters when someone at HMRC asks where a number came from.
We don't file for you, and we're not your tax adviser. If your situation involves a disclosure, work with a qualified one, and hand them a reconstructed history instead of a shoebox. They'll do a better job, faster, and it'll cost you less.
If you're holding a letter with a date on it, the free scan is the quickest way to find out what you're dealing with. Rush turnaround is available if that date is close.