Police said they were investigating potential offences under laws governing donations to political parties, which could include concealment of the source of funding or giving false information to the treasurer of a party.
"An investigation was launched in February 2025 after a referral was made to the Metropolitan Police by the Electoral Commission relating to donations made to a political party ahead of the 2024 UK General Election," a spokesperson for London's Metropolitan Police said.
Two people have been questioned but no arrests have been made, police said, without confirming the names of those involved in the donations being probed.
Richard Tice, Reform's deputy leader, told local radio on Friday the investigation was part of a "politically motivated smear campaign".
The party did not immediately respond to a request for comment.
Farage has been facing questions for weeks about his party's funds and his financial affairs, including undisclosed gifts from a cryptocurrency billionaire investor and a long-standing political ally, George Cottrell.
Cottrell went to prison in the US in 2017 after pleading guilty to wire fraud and now works in cryptocurrency.
The Times said the police investigation was looking at payments made by Cottrell's mother to Reform before the 2024 election.
Cottrell did not immediately respond to a request for comment left with a company where he is listed as a director.
Farage has repeatedly denied any wrongdoing, saying he received the donation from the billionaire crypto investor before announcing his candidacy in the 2024 election, and therefore did not need to declare it.
The Reform leader, who was a vocal Brexit campaigner, abruptly announced on Tuesday that he would resign his parliamentary seat of Clacton and run there again, seeking a vote of confidence from voters to answer criticism about his finances.
The by-election date will be held on August 13, the local authority announced on Friday.
Farage is likely to be the only mainstream candidate after other parties said they would refuse to take part in what they characterised as a stunt, leaving comedy candidate Count Binface as his highest-profile opponent.
A poll by the political consultancy Electoral Calculus said Reform had slipped from first to third in voting intentions, behind the governing Labour Party and the opposition Conservatives.
