Understanding Crypto Tax in the UK: What You Need to Know

Cryptocurrency has become a major part of modern investing and business, but many UK taxpayers are still unsure how crypto is taxed. Whether you're trading Bitcoin, investing in Ethereum, or earning through DeFi platforms, HMRC treats crypto assets as taxable — and understanding your obligations is essential to staying compliant.

How HMRC Views Cryptocurrency

HMRC does not consider cryptocurrency as money or currency. Instead, it treats crypto assets as property. This means that tax rules for capital gains and income apply depending on how you use or dispose of your crypto.

Common Types of Crypto Transactions

• Buying and selling crypto – subject to Capital Gains Tax (CGT).
• Trading or exchanging one crypto for another – also a taxable disposal.
• Using crypto to pay for goods or services – treated as a disposal for CGT purposes.
• Mining, staking, or airdrops – may be subject to Income Tax if they generate income.

Capital Gains Tax on Crypto

Most individuals who buy and sell crypto are liable for Capital Gains Tax when they dispose of their assets. A disposal occurs when you:

• Sell crypto for fiat currency (e.g., GBP).
• Exchange one cryptocurrency for another.
• Use crypto to purchase goods or services.
• Gift crypto to someone other than a spouse or civil partner.

Calculating Capital Gains

Your gain is the difference between the sale price (or market value) and the cost basis (what you paid for the asset, including transaction fees).

You can offset losses against gains to reduce your tax bill. The annual CGT allowance allows you to make a certain amount of gains tax-free each year (£3,000 for the 2025/25 tax year).

CGT Rates

• 10% for basic rate taxpayers.
• 20% for higher and additional rate taxpayers.

Income Tax on Crypto

If you receive crypto as payment for goods or services, through mining, staking, or airdrops, HMRC may treat it as income. The value of the crypto at the time you receive it is taxable as income, and you may also pay National Insurance contributions if it's part of your business activity.

If you later sell or exchange that crypto, you may also owe Capital Gains Tax on any increase in value since you received it.

Record-Keeping Requirements

HMRC requires detailed records of all crypto transactions. You should keep:

• Dates of transactions.
• Type and quantity of crypto assets.
• Value in GBP at the time of each transaction.
• Wallet addresses and exchange records.
• Transaction fees and receipts.

Accurate records make it easier to calculate gains, losses, and income — and are essential if HMRC requests evidence.

How to Report Crypto Taxes

Crypto gains and income are reported through the Self Assessment tax return. You'll need to:

1. Register for Self Assessment if not already registered.
2. Report capital gains and income from crypto in the relevant sections.
3. Pay any tax owed by 31 January following the end of the tax year.

Common Mistakes to Avoid

• Ignoring crypto-to-crypto trades (they are taxable).
• Failing to record transaction details.
• Assuming small amounts are tax-free.
• Forgetting to report income from staking or mining.

Why Professional Help Matters

Crypto taxation can be complex, especially with multiple wallets, exchanges, and transaction types. An online accountant experienced in crypto tax can:

• Calculate gains and losses accurately.
• Ensure compliance with HMRC rules.
• Identify allowable deductions and reliefs.
• Prepare and file your Self Assessment return.

Final Thoughts

Crypto tax in the UK is manageable with the right knowledge and systems in place. Keeping accurate records, understanding how HMRC classifies your transactions, and seeking professional advice ensures compliance and peace of mind.