HMRC's Kraken Notice: Activity Triggers Reporting, Not Gains

HMRC has served a Schedule 23 information notice on Kraken covering three UK tax years: 2022/23, 2023/24 and 2024/25. The detail that accountants must absorb immediately is this: the reporting threshold is based on transaction volume, not taxable profit. A client who lost money can be in HMRC's dataset. A client who made gains but never moved coins may not be. For any firm carrying crypto-active clients, the next twelve months are the last in which a voluntary disclosure on those years counts as unprompted.

What Schedule 23 Actually Authorises

Schedule 23 of the Finance Act 2011 gives HMRC officers the power to require a "relevant data-holder" to hand over "relevant data." The mechanism is not new. HMRC has applied it to letting agents, card processors and online marketplaces for years. What is new here is both the target and the reach: a major crypto exchange, across three named tax years, with a published threshold that sets the reporting line with unusual precision.

How the threshold works in practice

Kraken has set the threshold at £5,000 or more of activity per asset and per transaction type within a covered tax year. The aggregation runs independently for each coin or currency and for each of eight transaction types. Kraken's own worked examples illustrate the result clearly. £4,500 of bitcoin sold for sterling in 2022/23 falls below the line. £5,250 of ether sold in the same year sits above it. £6,000 of bitcoin swapped into other coins in 2023/24 is reported. £7,500 of sterling deposited in 2024/25 is also reported.

The sentence that Kraken itself flags as the one to read carefully is this: the threshold "may be reached even if you did not make a profit, or even if your net gain was much lower than £5,000." A client who sold £5,000 of a coin at a loss is in the file. A client who made £4,000 of gains on the same coin and held it without selling is not.

What data Kraken provides

For any account that crosses the threshold, Kraken may provide the account holder's name, address, email address, account identifier, and aggregated activity broken down by asset and transaction type. Staking rewards and airdrops are not reported at the point they are received, though a subsequent disposal of those coins is treated as any other transaction. Kraken has also confirmed it cannot tell individual customers whether their account was included in the notice response.

Why This Notice Is Distinct from CARF

Kraken is explicit that this notice is separate from the Cryptoasset Reporting Framework. CARF applies to activity from 1 January 2026 onwards and operates through a different legal mechanism. The Schedule 23 notice reaches backwards into years that are already closed or closing for amendment, making the compliance picture more urgent rather than forward-looking. Firms that have been focused on preparing clients for CARF obligations from 2026 will need to layer this retrospective exposure on top of that planning.

The Gap Between HMRC's Data and a Tax Computation

Kraken has been direct about what its data does not contain, and the list maps almost exactly onto the questions a practitioner would need to answer to produce a return. There is no cost basis, no gains or losses, no staking or airdrop income, no complete fee record, nothing from other exchanges or self-custody wallets, and no UK pooling. What HMRC receives is a set of turnover-style totals. Only a properly constructed computation turns those totals into a taxable figure, and that computation is the accountant's job, not HMRC's.

The pooling question for 2022 and 2023

UK capital gains tax on cryptoassets uses share pooling rules under TCGA 1992. Each disposal is matched first to same-day acquisitions, then to acquisitions in the 30 days following the disposal, and finally to the section 104 pool at average cost. In the swap-heavy market conditions of 2022 and 2023, the difference between a per-trade figure and a correctly pooled figure can run into thousands of pounds. An exchange summary that shows £30,000 of disposals is not a computation. It is a starting point, and the pooled gain or loss can be materially different.

Losses, deadlines and the self-assessment obligation

Two specific technical points deserve prominence in client conversations right now. First, a capital loss is only allowable if it is claimed in time. A loss from 2022/23 must be on a return or in a formal letter to HMRC by 5 April 2027. HMRC's dataset will show that the year had activity. It will not identify, preserve, or claim the loss. Second, the obligation to report cryptoasset disposals in self-assessment exists even where gains fall below the annual exempt amount. A client who swapped coins repeatedly, never converting to sterling, may still have had a year with reportable disposals, because a crypto-to-crypto swap is a disposal under TCGA 1992. The annual exempt amount varied across the covered years, so a year that looks taxable on raw exchange totals may not have been, but that conclusion requires a computation, not an assumption.

Penalty Exposure and the Unprompted Disclosure Window

This is where the notice creates the most direct urgency for practitioners. HMRC's enquiry and assessment powers run to four years where a client took reasonable care, six years where they did not, and twenty years where the failure was deliberate. The penalty range under Schedule 24 of the Finance Act 2007 varies significantly depending on whether a disclosure is made before or after HMRC makes contact.

The penalty differential in plain terms

For a careless inaccuracy, an unprompted disclosure carries a penalty range of nil to 30 percent of the tax due. Once HMRC has written to the client, the same disclosure becomes prompted, and the floor rises to 15 percent. For deliberate behaviour, the unprompted floor is 20 percent and the prompted floor is 35 percent. The notice exists, the three years are named, and the threshold is published. The reasonable professional reading is that HMRC either already holds or will shortly hold the Kraken data for those years, and that the window in which a client's disclosure qualifies as unprompted is running.

Kraken's page uses the word "may" when describing whether data will be provided. That hedge is present, but it offers limited practical comfort when the notice has been issued, the years are identified, and the threshold is published publicly. Acting on the basis that the data has been shared is the conservative and defensible position.

Practical Priorities for Accounting Firms and CFOs

The immediate task is a structured review of the crypto-active client population across all three covered years. For firms that have been using crypto accounting software to maintain pooled records, that review should be faster because the data structure already matches the computation requirements. For clients whose records exist only as exchange exports, the review will take longer and the risk of missing pooling adjustments or unclaimed losses is higher.

A three-year review checklist

The following questions need an answer for each client and each covered year before any disclosure decision is made.

• Was a self-assessment return filed for that year? If the client was already in self-assessment, was the cryptoasset disposal reported correctly?
• Did the client use Kraken, and did their activity on the exchange exceed the £5,000 threshold for any asset or transaction type?
• Has a correctly pooled computation been prepared, or does only an exchange summary exist?
• Were any capital losses incurred in 2022/23? If so, have they been claimed within the four-year window that closes on 5 April 2027?
• Did the client use other exchanges or self-custody wallets in the same years? HMRC's Kraken data covers only Kraken activity, but a complete computation must cover all disposals.
• Were staking rewards or airdrops received and later sold? The receipt is not in Kraken's report, but the disposal is.

For corporate clients and CFOs managing treasury crypto positions, the same questions apply at entity level, with the additional layer of corporation tax rather than capital gains tax, and the need to reconcile exchange records against the company's own bookkeeping using reliable HMRC-compliant digital asset accounting software to ensure the firm's own registration and reporting obligations are current.

What Firms Should Tell Clients Now

The message to clients should be direct. HMRC has obtained, or is in the process of obtaining, Kraken transaction data for the three years to April 2025. The threshold is based on volume, not profit, so a client who believes they "didn't make anything" may still be in the dataset. If returns are missing or incomplete, the time to act is before HMRC writes, not after. The penalty difference between an unprompted and a prompted disclosure is real and meaningful. Waiting to see whether a letter arrives is a strategy, but it is an expensive one if the letter does arrive.

For clients already in self-assessment who reported their crypto activity, the priority is confirming that the computation methodology was correct: that pooling was applied, that the right annual exempt amount was used, and that any losses were formally claimed. A correct return is a complete defence. An estimate or a summary is not.

Firms should also flag that how UK banks are handling blocked crypto transfers has generated its own trail of data that regulators and HMRC can cross-reference. The Kraken notice is one data point in a broader pattern of HMRC building structured information on the UK crypto population.

Frequently Asked Questions

Does the £5,000 threshold mean a client owes £5,000 in tax?

No. The threshold determines whether Kraken reports the account to HMRC, not whether tax is owed. A client with £5,001 of crypto sold at a loss will appear in HMRC's data, but their tax liability from that activity could be nil or even negative if losses are claimed correctly.

The client swapped coins but never converted to sterling. Is that a disposal?

Yes. Under TCGA 1992 as applied to cryptoassets, exchanging one token for another is a disposal. Each swap is a taxable event, and the gain or loss is calculated using the pooling rules. Clients who "only swapped" are not exempt from reporting obligations.

What if the client used other exchanges as well as Kraken?

HMRC's Schedule 23 notice covers only Kraken data. However, a client's complete tax position requires all disposals across all platforms and wallets to be included in the computation. The Kraken data gives HMRC evidence that activity occurred, and an incomplete return that covers only part of the activity remains an inaccurate return.

Can a client still make an unprompted disclosure?

The notice has been issued and the threshold is published, which means HMRC has signalled it is building data on this population. Whether a specific client's disclosure would be treated as unprompted is a facts-and-circumstances question, but the window is narrowing. The conservative professional position is to treat any disclosure made now as potentially the last unprompted opportunity for these three years.

What about the 2022/23 loss deadline?

Capital losses from 2022/23 must be formally claimed by 5 April 2027. That deadline is fixed regardless of the Kraken notice. Any client who had a loss year in 2022/23 and has not yet filed a return or written to HMRC needs to act before that date, independently of any voluntary disclosure about gains.

Source: AccountingWEB