UK Crypto Tax Explained: Your Guide to HMRC Rules
Cryptocurrencies and digital assets have surged in popularity, bringing exciting investment opportunities but also new tax complexities. If you've bought, sold, swapped, or earned crypto, you need to understand how HM Revenue & Customs (HMRC) views these assets and what your tax obligations are. Getting it wrong can lead to significant penalties.
At Plouta, our mission is to provide you with clear, actionable knowledge to help you navigate the financial landscape confidently. This guide will demystify the UK's tax rules for cryptoassets, explaining when you might owe Capital Gains Tax or Income Tax, what allowances you can use, and the crucial importance of keeping good records.
What You’ll Learn in This Guide:
HMRC's View: How cryptoassets are generally treated for tax purposes.
Capital Gains Tax (CGT): When it applies to your crypto disposals.
Income Tax: When crypto activities are treated as income.
Key Allowances: How to use your tax-free allowances.
Specific Scenarios: Tax on staking, mining, airdrops, NFTs, and DeFi.
Record Keeping: Why meticulous records are non-negotiable.
Reporting to HMRC: When and how to declare your crypto activity.
FAQs: Answering your most common crypto tax questions.
How HMRC Views Cryptoassets
The fundamental point to understand is that HMRC does not generally view cryptoassets like Bitcoin or Ethereum as 'currency' or 'money'. Instead, for tax purposes, they are usually treated as capital assets or property, similar to shares or antiques.
This means two main types of tax can apply:
Capital Gains Tax (CGT): On the profits you make when you 'dispose' of your cryptoassets.
Income Tax (and potentially National Insurance): If your activities are considered 'trading', or if you receive cryptoassets as a form of non-cash income (e.g., from employment, mining, or certain staking activities).
Capital Gains Tax (CGT) on Crypto
This is the tax that affects most individuals who buy and hold crypto as an investment. CGT is potentially due when you dispose of your cryptoassets. A 'disposal' includes:
Selling crypto for fiat currency (like GBP, EUR, USD).
Swapping one type of cryptoasset for another (e.g., swapping Bitcoin for Ethereum).
Spending crypto directly on goods or services.
Gifting crypto to another person (unless it's to your spouse or civil partner).
Calculating Your Gain or Loss: For each disposal, you need to calculate your gain or loss:
[Proceeds from Disposal (in GBP)] - [Allowable Costs (in GBP)] = Gain or Loss
Proceeds: The value in GBP of what you received when you disposed of the asset.
Allowable Costs:
The original purchase price of the crypto (in GBP).
Transaction fees associated with acquiring and disposing of the asset (e.g., exchange fees).
Specific rules (share pooling) apply if you've bought the same crypto multiple times at different prices – you must use the 'same day', 'bed and breakfasting (30-day)', and 'Section 104 pool' rules to determine the correct cost basis.
The CGT Annual Exempt Amount (AEA): Every individual has a CGT allowance each tax year. For 2025/26, this is £3,000. You only pay CGT on total gains above this allowance in a tax year.
CGT Rates (for cryptoassets): The rate you pay on gains above the AEA depends on your Income Tax band:
10% for basic-rate taxpayers.
20% for higher and additional-rate taxpayers.
Income Tax on Crypto
Income Tax (and potentially National Insurance Contributions - NICs) applies when your crypto activities are seen as generating income rather than capital gains.
Trading: If HMRC considers your crypto activities frequent, organised, and conducted with an intention to make short-term profits, they may classify you as a 'trader'. In this case, your profits are treated as trading income, subject to Income Tax and Class 4 NICs, but you can also deduct allowable business expenses. The distinction between 'investing' and 'trading' can be complex.
Mining: Crypto received from mining activities is generally treated as miscellaneous income at the time of receipt, based on its GBP value. Income Tax applies if this income, combined with other miscellaneous income, exceeds the £1,000 Miscellaneous Income Allowance. When you later dispose of the mined crypto, it may also be subject to CGT.
Staking Rewards: The tax treatment depends on the nature of the reward. If it's considered a return akin to interest, it's likely miscellaneous income. If it's considered more like newly created tokens resulting from participation, it might not be income upon receipt but could have a zero cost basis for CGT later. HMRC's guidance is still evolving here.
Employment Income: If you are paid in crypto by your employer, this is treated as 'money's worth' income, subject to Income Tax and NICs via PAYE, based on the GBP value at the time of payment.
Airdrops: Often treated as miscellaneous income if received without doing anything in return, taxable if above the £1,000 allowance. If received in return for specific services, it could be trading income.
Tax on Specific Scenarios
DeFi (Decentralised Finance): Activities like lending crypto or providing liquidity can generate returns. These are often treated as miscellaneous income (similar to interest), taxable above the £1,000 allowance. Swapping tokens within DeFi protocols usually counts as a disposal for CGT.
NFTs (Non-Fungible Tokens): Generally treated like other cryptoassets. Buying and selling NFTs as an investor typically triggers CGT on any profits. Creating and selling NFTs as a business would likely be trading income.
Forks & Chain Splits: When a blockchain forks (e.g., Bitcoin Cash from Bitcoin), you acquire new cryptoassets. HMRC generally considers these to have a zero acquisition cost for CGT purposes, unless specific costs were incurred to acquire them.
Record Keeping: The Golden Rule
You MUST keep detailed records of ALL your cryptoasset transactions. This is non-negotiable for calculating your tax liability accurately. Your records should include:
Type of cryptoasset.
Date of transaction.
Type of transaction (buy, sell, swap, spend, gift).
Number of units.
Value of the transaction in GBP at the time.
Cumulative total of units held.
Any associated fees.
Crypto tax software (like Koinly, Recap, CoinLedger) can be invaluable for automatically collating this information from exchanges and wallets and generating tax reports.
Reporting Your Crypto Activity to HMRC
You need to tell HMRC about your crypto gains or income if:
Your total Capital Gains from all sources (including crypto) in a tax year exceed the £3,000 Annual Exempt Amount.
Your total proceeds from disposing of cryptoassets (regardless of gains) exceed a certain threshold (historically this was 4 times the AEA, e.g., £12,000, but check the latest Self Assessment criteria).
You have Income Tax to pay on crypto received from trading, mining, staking, airdrops, or employment that wasn't taxed via PAYE and exceeds relevant allowances.
You report this information via your Self Assessment tax return by the 31st January deadline following the end of the tax year. The tax return form now includes specific boxes asking about cryptoasset disposals.
Frequently Asked Questions (FAQs) About UK Crypto Tax
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No. Simply buying and holding crypto does not trigger a tax event. Tax is only potentially due when you dispose of it (sell, swap, spend, gift).
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Yes. This is treated as disposing of the first cryptoasset and acquiring the second. You need to calculate the Capital Gain or Loss on the crypto you disposed of, based on its value in GBP at the time of the swap.
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Yes. This also counts as a disposal. You need to work out the GBP value of the crypto at the time you spent it and calculate your gain or loss compared to when you acquired it.
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It depends. HMRC's guidance suggests that if the reward is akin to interest, it's likely income. If it's more like acquiring new tokens through participation, it might have a zero cost basis for CGT later. This is a complex area, and using crypto tax software or seeking advice is recommended.
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If your transactions are numerous or involve complex activities like DeFi, NFTs, or significant trading, using crypto tax software and potentially consulting an accountant who specialises in cryptoassets is highly advisable to ensure accuracy and compliance. For simple buy/hold/sell scenarios with gains below the allowance, you may be able to calculate it yourself with careful record-keeping.
Conclusion: Stay Informed and Keep Records
The world of cryptoassets is exciting, but tax compliance is crucial. HMRC is actively focusing on this area, and failing to declare taxable crypto gains or income can lead to penalties and interest.
The key principles are: treat crypto like property, understand that disposals trigger potential CGT, recognise when activities might be classed as income, and above all, keep meticulous records of every transaction in GBP. By staying informed and organised, you can navigate the UK's crypto tax rules confidently.
Reference Link:
https://www.gov.uk/guidance/check-if-you-need-to-pay-tax-when-you-sell-cryptoassets
https://www.gov.uk/government/news/new-cryptoasset-rules-to-drive-growth-and-protect-consumers
https://www.fca.org.uk/news/press-releases/fca-opens-retail-access-crypto-etns
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Disclaimer: This guide provides general information about the UK taxation of cryptoassets based on HMRC guidance known as of October 2025. It is for informational and educational purposes only and does not constitute financial or tax advice. Tax laws and HMRC's interpretation can change. The tax treatment of cryptoassets can be complex and depends on individual circumstances. Always seek professional, regulated advice from a qualified accountant or tax specialist experienced in cryptoassets.