If you've realised that you should have declared crypto gains to HMRC but didn't, the important thing is to establish exactly what has been missed before trying to correct it.
That might mean looking back over several tax years, checking whether your crypto records are reliable and working out whether tax was actually due. Once you understand the position, you can determine the appropriate way to bring your tax affairs up to date.
In this guide, we explain the practical steps to take if you think you have undeclared crypto tax in the UK, particularly if HMRC has not contacted you yet.
Contents
- 1. Don't Assume You Know How Much Tax You Owe
- 2. Identify Which Tax Years and Activities Are Affected
- 3. Get Your Records Into a Reliable Position
- 4. Establish What Should Have Been Reported
- 5. Choose the Correct Route to Fix It
- 6. Why Acting Before HMRC Contacts You Matters
- 7. When to Consider Professional Help
- Conclusion
1. Don't Assume You Know How Much Tax You Owe
Not declaring your crypto activity does not necessarily mean that tax was due. Your position needs to be calculated for each affected tax year, taking into account the rules, exemptions and losses that applied at the time.
In practice, that can produce a very different picture from the one you might initially expect. We've seen this with clients who came to us concerned that several years of crypto activity had gone unreported. Once we reconstructed the position, some years required action while others did not because gains were within the annual exemption or available losses reduced the taxable amount.
Before trying to correct the position with HMRC, you need to understand what happened and establish which tax years, if any, need to be brought up to date.
2. Identify Which Tax Years and Activities Are Affected
Start by looking at the period over which you have been involved with crypto and what you have actually done during that time.
This could include:
- Buying and selling crypto
- Swapping one cryptoasset for another
- Spending or gifting crypto
- Receiving staking rewards or other crypto income
- Using multiple exchanges and wallets
- Submitting Self Assessment returns without including your crypto activity
- Not submitting a tax return because you did not realise there was anything to report
If you have been investing in crypto for several years, earlier transactions can affect calculations much later even if they did not create a reporting requirement at the time. Historic acquisitions, for example, can form part of the pooled acquisition cost used when calculating subsequent capital gains.
The aim at this stage is not to calculate everything immediately. It is to establish the scope of the problem and identify which periods may need further review.
3. Get Your Records Into a Reliable Position
Once you know which periods may be affected, you need records that are reliable enough to calculate the tax position.
For many investors, this means bringing together transaction data from exchanges and wallets using crypto tax software such as Koinly.
However, simply generating a tax report does not guarantee that the underlying data is complete. In our experience, missing transactions, incomplete imports, incorrect classifications and missing acquisition costs are all very common issues when reconstructing historic crypto records, and these can all affect the final calculation.
You should therefore be reasonably confident that the transaction history reflects what actually happened before relying on the resulting tax figures.
4. Establish What Should Have Been Reported
Once the underlying records are reliable, the next step is to establish any reporting obligations for each affected tax year.
For most crypto investors, the main consideration will be Capital Gains Tax.
Taxable disposals can arise when crypto is:
- Sold for a fiat currency like GBP
- Exchanged for another cryptoasset or stablecoin
- Spent on goods or services
- Given to someone other than a spouse or civil partner
The relevant gains and losses then need to be calculated under the UK Capital Gains Tax rules and considered alongside the annual exemption relevant to each tax year and any available capital losses.
Crypto income should also be considered where relevant. For example, staking rewards are considered as taxable income, although the £1,000 trading allowance may cover miscellaneous income like this in some circumstances.
The objective at this stage is to understand what the reporting obligations were in each tax year. You may ultimately find that some years require correcting while others do not.
5. Choose the Correct Route to Fix It
Once you know what should have been reported, the next question is how to correct it.
There is no single route that applies to every case.
The appropriate method can depend on:
- Which tax years are affected
- Whether Self Assessment returns were previously submitted
- Whether those returns can still be amended
- Whether HMRC has already contacted you
For a recent tax year, it may still be possible to make an amendment to a return you've already submitted. However, older tax years may instead need to be brought up to date through a voluntary disclosure to HMRC.
It is therefore important to establish which routes are available for each of the tax years in which you had a reporting obligation.
6. Why Acting Before HMRC Contacts You Matters
There is an important difference between identifying an issue yourself and waiting until HMRC identifies it.
When considering penalties, HMRC distinguishes between disclosures made voluntarily and those made after HMRC has already raised concerns.
The exact treatment depends on the circumstances, including why the original error occurred and how the position is corrected, but coming forward before HMRC contacts you can put you in a better position.
If you already know that something may have been missed, it is usually in your interest to bring your affairs up to date voluntarily rather than simply waiting to see whether HMRC raises the issue first.
For more detail on how HMRC approaches behaviour and penalties, see our dedicated article on HMRC crypto penalties.
If HMRC has already contacted you about your crypto activity, the position may be different. See our HMRC crypto nudge letter guide for more information.
7. When to Consider Professional Help
Not every historic crypto tax issue requires an accountant.
If you have a small number of straightforward transactions, a clear understanding of what was missed, and the ommission relates to a a recent tax return that you filed yourself, you may be comfortable correcting the position yourself.
Professional support becomes more valuable where:
- Several tax years are involved
- Your activity is spread across multiple exchanges and wallets
- Historic records are missing or unreliable
- Your crypto tax software contains unresolved warnings
- Your balances do not reconcile
- The potential undeclared gains are substantial
- You are unsure which route should be used to correct the position
- HMRC has already contacted you
In these cases, a crypto accountant can help establish what happened, determine what should have been reported, identify the appropriate way to bring the position up to date, and deal with HMRC on your behalf.
Conclusion
If you think you have undeclared crypto tax, the most important thing is to establish the position before trying to correct it.
That means identifying the periods affected, getting your records into a reliable position, establishing what should have been reported and then using the appropriate route to bring your tax affairs up to date.
If you think you may have undeclared crypto gains and would like help reviewing your position, we can support you from establishing the underlying figures through to correcting the position and dealing with HMRC.
