If you invest, trade, stake, or earn crypto in the UK, taxes are no longer something you can ignore. Over the past few years, I have seen HMRC move from basic guidance to active enforcement, data sharing with exchanges, and targeted compliance letters. Many investors still assume crypto sits outside the tax system, but that belief often leads to mistakes, missed deadlines, and unexpected tax bills. This guide exists to help you avoid those problems before they start.
I have worked closely with UK crypto investors who range from casual holders to active traders and DeFi users. The common issue is not a lack of intent to comply, but confusion around how different transactions are taxed and reported. This article breaks down UK crypto tax rules for 2026 in a clear and practical way, so you can understand your obligations, calculate your taxes correctly, and file with confidence.
Key Takeaways
- HMRC treats cryptocurrencies as property for taxation.
- Crypto capital gains (above £3,000 tax-free allowance) attract taxes at a rate of 10% or 24%.
- If you earn in or through cryptocurrency, you are liable to pay income tax at a rate between 0% to 45%.
- Crypto taxes are reported through the Self Assessment tax return by 31st January.
Is Cryptocurrency Taxable in the UK?
Yes, cryptocurrency is taxable in the UK. HMRC does not treat crypto as money or foreign currency. Instead, it is treated as property and taxed under existing UK tax laws rather than undera separate crypto-specific framework.
Taxation depends on how crypto is used. When you dispose of crypto, such as by selling, swapping, or spending it, Capital Gains Tax can apply. When you earn crypto through activities like mining, staking, airdrops, or employment, it is usually treated as income and taxed under Income Tax rules.
Crypto Tax In The UK: Key Regulatory Framework
Unlike some countries, the UK does not have a single, standalone crypto tax law. Instead, HMRC applies existing tax legislation by treating cryptocurrencies as property or assets. Here’s which section applies to tax cryptocurrencies:
Capital Gains Tax (CGT)
Most individual crypto disposals are subject to Capital Gains Tax and are governed by the Taxation of Chargeable Gains Act (TCGA) 1992.
- Section 21(1) TCGA 1992: Defines what counts as an asset for CGT purposes. HMRC relies on this section to classify cryptoassets as chargeable assets because they can be owned and have a measurable value.
- Section 38 TCGA 1992: Sets out allowable costs that can be deducted when calculating gains, such as acquisition costs and transaction fees.
- Section 104 TCGA 1992: Introduces the Section 104 pool. Since crypto tokens are fungible, they are pooled together to calculate an average cost basis rather than being tracked individually.
- Section 105 TCGA 1992: Establishes the Same Day Rule, requiring disposals to be matched with acquisitions made on the same day.
- Section 106A TCGA 1992: Covers the 30 Day Rule, also known as the bed and breakfast rule, which matches disposals with repurchases made within 30 days.
Income Tax
Crypto income and trading activities are taxed under the Income Tax Act (ITA) 2007 and the Income Tax (Trading and Other Income) Act (ITTOIA) 2005.
- Section 989 ITA 2007: Provides the legal definition of a trade. HMRC uses this section, alongside the badges of trade, to decide whether crypto activity is a hobby or a taxable business.
- Section 688 ITTOIA 2005: Applies to miscellaneous income. This section is commonly used to tax staking rewards, non-commercial mining income, and certain airdrops.
- Part 2 ITTOIA 2005: Governs trading income where crypto activity is organised and commercial in nature.
Corporation Tax (For Businesses)
Companies dealing in crypto are taxed under the Corporation Tax Act (CTA) 2009, rather than the CGT rules.
- Part 3 CTA 2009: Covers trading profits for companies actively buying, selling, or mining crypto.
- Part 7 CTA 2009: Applies to derivative contracts involving cryptoassets, such as futures or options, when held by a company.
- Part 8 CTA 2009: Relates to intangible fixed assets and may apply to certain tokens held for long-term business use.
Inheritance Tax (IHT)
- Section 3 Inheritance Tax Act 1984: Defines property for inheritance purposes. Since crypto is treated as property, it forms part of an individual’s estate and may be subject to Inheritance Tax on death.
Latest Update On Crypto Tax In The UK
Since HMRC began tightening its approach to crypto taxation, several major regulatory and reporting changes have reshaped how UK investors must report and pay tax.
2026–27: The CARF Transparency Era
From 1 January 2026, the UK implemented the Crypto-Asset Reporting Framework (CARF). Crypto exchanges must report user identities and transaction data directly to HMRC. This data will also be shared across 60+ countries, significantly reducing the scope for offshore non-reporting.
2025–26: Low Allowance Becomes the New Normal
The Capital Gains Tax allowance remains fixed at £3,000. CGT rates of 18% for basic-rate taxpayers and 24% for higher-rate taxpayers now apply for the full tax year, increasing the tax burden on even modest crypto gains.
2024–25: The Split-Year and Rate Increase
Following the Autumn Budget on 30 October 2024, CGT rates increased mid-year. Gains before 30 October were taxed at 10% or 20%, while gains after that date moved to 18% or 24%. A dedicated crypto section was also added to Self Assessment forms.
2023–24: The Allowance Cut
The Annual Exempt Amount was halved from £12,300 to £6,000, bringing many casual investors into the CGT system for the first time.
2022–23: Compliance Pressure Begins
HMRC started issuing large volumes of crypto nudge letters using exchange data, signalling increased enforcement and data matching.
2021–22: Formal Guidance Introduced
HMRC published its first comprehensive Cryptoassets Manual, setting the foundation for how cryptocurrencies are taxed under existing UK law.
Can HMRC Track My Cryptocurrencies?
Yes, HMRC can track cryptocurrency activity in the UK. Many investors still assume crypto transactions remain private, but UK tax enforcement has changed significantly. HMRC now uses multiple data sources to identify unreported activity and check whether crypto disclosures match what exchanges and platforms report.
Data Sharing With UK Crypto Exchanges
HMRC has formal data sharing arrangements with major UK and international crypto exchanges. These platforms provide transaction histories linked to verified user accounts, allowing HMRC to review disposals, transfers, and trading activity connected to UK taxpayers.
Access to Historical Crypto Transaction Records
Crypto transaction data is not limited to recent years. HMRC can access records going back to 2014, which means past activity can still be reviewed if inconsistencies appear in current tax filings or disclosures.
Use of KYC and Identity Information
Most regulated exchanges collect Know Your Customer details, including legal names, addresses, and residency status. HMRC uses this information to connect wallet activity with real individuals, even when assets move across multiple platforms.
New Reporting Rules From 2026
From 2026, as per a new rule, crypto exchanges operating in the UK must collect and share expanded customer data with HMRC by 2027. This includes wallet addresses, transaction values, disposals, transfers, and fair market values. Platforms that fail to comply may face fines of up to £300 per affected user.
Look Out for HMRC Letters: HMRC has sent more than 65,000 warning letters to investors it believes may have failed to report crypto activity. These letters often lead to follow-up checks or disclosure requests if ignored.
When To Report Crypto Taxes in the UK?
The UK tax year runs from 6 April to 5 April of the following year. Any crypto gains or income you generate during this period must be reviewed, calculated, and included in your tax records for that specific financial year.
Therefore, crypto activity that took place between 6 April 2025 and 5 April 2026 must be reported by 31 January 2026. This deadline applies to both filing your return and paying any tax due, making timely preparation essential.
Lost In Your Crypto Tax Chaos?
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What If You Don’t Report Crypto to the HMRC?
Failing to report cryptocurrency does not lead to a single fixed outcome. HMRC assesses cases based on behaviour, intent, and the steps taken by the taxpayer to meet their reporting obligations.
- Reasonable Care: If you made an honest attempt to report correctly but underpaid, HMRC can ask you to correct the error and pay outstanding tax for up to 4 years.
- Careless Behaviour: Where reporting mistakes occurred due to lack of attention or poor record keeping, HMRC may recover unpaid tax going back as far as 6 years.
- Deliberate Non Disclosure: If HMRC believes crypto income or gains were hidden intentionally, it can assess and recover tax for up to 20 years, along with penalties and interest.
Attention Tax-Payers: HMRC offers a dedicated voluntary disclosure service for crypto, allowing taxpayers to come forward and correct past filings before enforcement action escalates.
How Much Tax is Applied On Crypto in the UK?
The amount of tax you pay on cryptocurrency in the UK depends on whether your activity results in a capital gain or taxable income. HMRC applies different rates and allowances to each, based on when the transaction occurred and your overall income level.
- Capital Gains Tax on Crypto: Gains above the £3,000 annual allowance are taxed at 10% or 24%, depending on your income band and time of disposal.
- Income Tax on Crypto Earnings: Crypto income above the £12,570 personal allowance is taxed at standard income tax rates, ranging from 20% to 45%, based on your total annual earnings.
Use a reliable crypto tax calculator to determine your crypto taxes in the UK correctly.
Capital Gains Tax on Cryptocurrency in the UK
HMRC applies Capital Gains Tax when you dispose of cryptocurrency and make a profit. Crypto is treated as a capital asset, so tax is based on how its value changes between acquisition and disposal.
Capital Gains Tax Transactions
- Selling Crypto for Fiat: Converting crypto into GBP or another fiat currency is a disposal and may result in a taxable gain.
- Crypto to Crypto Trades: Swapping one crypto asset for another, including stablecoins or NFTs, is treated as a disposal even if no fiat is involved.
- Spending Crypto: Using crypto to pay for goods or services counts as disposing of an asset and can trigger CGT.
- Gifting Crypto: Gifts to anyone other than a spouse or civil partner are taxable disposals based on market value at the time of transfer.
- Certain DeFi Transactions: Some DeFi activities, such as trading liquidity pool tokens, are treated as disposals and may create taxable gains.
Note: Any losses from these crypto disposals can be offset against gains, as per the HMRC rule.
Capital Gains Allowance
Each UK taxpayer has an annual Capital Gains Tax allowance of £3,000, and only profits above this threshold are subject to tax.
Capital Gains Tax Rate for 2026
Capital gains from crypto are taxed between 10% and 24%, based on your overall income level and when the transaction took place.
Tax Rate (After October 2024) | Tax Rate (Before October 2024) | Taxable Income |
18% | 10% | If your income is up to £50,270, i.e., falls under the Basic Rate Income Band. |
24% | 20% | If your income is up to £150,000, i.e., falls under the Higher Rate Income Band. |
24% | 20% | If your income is above £150,000, i.e., falls under the Additional Rate Income Band. |
Income Tax on Crypto in the UK
Income Tax applies when cryptocurrency is earned rather than disposed of. HMRC looks at whether you receive crypto as a form of income and taxes it based on its value at the time of receipt.
Income Tax Transactions
- Getting Paid in Crypto: Crypto received as salary, freelance payment, or compensation is treated as income and taxed at its pound sterling value on the payment date.
- Staking Rewards: Rewards earned from staking are usually classed as income when received, with further tax implications if you later dispose of those tokens.
- Mining Rewards: Mining income is taxed based on whether the activity is a hobby or a business, with the value of tokens received treated as income.
- Airdrops in Certain Cases: Airdrops received in return for an action or service are taxed as income at their market value on receipt.
- DeFi Income: Interest, yield, or reward tokens received from DeFi protocols are generally treated as income when they are credited to your wallet.
Income Tax Rate for 2026
Here’s the income tax rate for tax year 2025-26, due on 31st January 2027.
Tax Rate | Taxable Income Range | Tax Bands |
0% | £0 – £12,570 | Personal Allowance |
20% | £12,570 – £50,270 | Basic Rate |
40% | £50,270 – £125,140 | Higher Rate |
45% | £125,140+ | Additional Rate |
Note: Up to £1,000 of income from trading or property is tax-free under the Trading and Property Allowance. If you receive income from both, you can claim up to £2,000 tax-free in total.
Tax on Crypto Capital Losses in the UK
A capital loss occurs when you dispose of cryptocurrency for less than its allowable cost. This includes selling, swapping, or spending crypto at a lower value than its acquisition price, after factoring in eligible transaction fees.
Using Losses to Reduce Capital Gains
Capital losses can be offset against taxable capital gains from the same tax year. There is no limit on how much loss you can use, which means gains can be reduced down to the £3,000 annual Capital Gains Tax allowance.
Carrying Losses Forward
If your losses exceed your gains in a tax year, the unused amount can be carried forward indefinitely. These carried forward losses can be used to reduce capital gains in future years, but only if they are properly reported to HMRC.
Reporting Losses to HMRC
Crypto losses must be declared on your Self Assessment tax return within 4 years of the end of the tax year in which they occurred. If they are not reported within this window, HMRC will not allow them to be used later.
Also Read: Crypto Tax Loss Harvesting in the UK
Tax on Lost or Stolen Cryptocurrencies in the UK
Lost crypto, such as crypto assets locked behind forgotten private keys or sent to the wrong address, is not treated as a disposal. HMRC considers you to still own the assets, even if you cannot access them. As a result, no Capital Gains Tax loss automatically arises at the point of loss.
Negligible Value Claims for Lost Assets
If you can demonstrate that there is no realistic prospect of recovering the crypto, HMRC may allow a negligible value claim. This treats the asset as if it were disposed of and immediately reacquired at a negligible amount, creating a capital loss that can be used against gains.
Tax Treatment of Stolen Cryptocurrency
Theft does not count as a disposal for Capital Gains Tax purposes because ownership is not considered transferred. Even in cases of hacking, phishing, or scams, HMRC generally views the assets as still belonging to you unless proven otherwise.
Claiming Losses on Stolen Crypto
A capital loss may only be claimed if the stolen tokens later become worthless and you can provide evidence of this. Negligible value claims are not allowed if the assets were already worthless when acquired or if the tokens were never actually received.
Pooling Rules and Wider Impact
Negligible value claims must be made against the entire Section 104 pool for that token, not individual holdings. This means the claim affects all units of the same crypto you hold, even across different wallets and exchanges.
Recovered Crypto and Future Tax Treatment
If lost or stolen crypto is later recovered, it is treated as though it was never disposed of. Tax only applies when you eventually sell or dispose of the recovered assets. Partial recoveries require careful cost basis calculations for the recovered portion.
Rug Pulls and Exchange Collapses
In rug pull cases, tokens usually still exist but with little or no market value. Many investors realise a loss by disposing of the tokens for nil value. For collapsed exchanges, tax treatment remains complex and fact specific. HMRC guidance is limited, so detailed records and professional advice are strongly recommended.
An Overview of Cryptocurrency Taxes in the UK for 2026-27
Here’s how HMRC taxes different crypto transactions in the UK:
Crypto Transactions | Tax Treatment |
Buying crypto with GBP or other fiat | Tax free |
Holding crypto | Tax free |
Transferring crypto between your own wallets or exchanges | Tax free (transfer fees may trigger Capital Gains Tax) |
Selling crypto for fiat | Capital Gains Tax |
Crypto to crypto trades (including stablecoins and NFTs) | Capital Gains Tax |
Spending crypto on goods or services | Capital Gains Tax |
Mining crypto as a hobby | Income Tax on receipt, Capital Gains Tax on disposal |
Mining crypto as a business | Income Tax on trading profits |
Staking rewards | Income Tax on receipt, Capital Gains Tax on disposal |
Airdrops earned through actions | Income Tax on receipt, Capital Gains Tax on disposal |
Airdrops with no action taken | Capital Gains Tax on disposal only |
Hard fork tokens | Tax free on receipt, Capital Gains Tax on disposal |
Crypto lending rewards | Income Tax or Capital Gains Tax depending on reward type |
Entering or exiting crypto loan positions | Capital Gains Tax if beneficial ownership transfers |
Gifting crypto to spouse or civil partner | Tax free |
Gifting crypto to others | Capital Gains Tax |
Donating crypto to a registered charity | Tax free (with limited exceptions) |
Margin trading profits | Capital Gains Tax |
Crypto derivatives and futures (retail users) | Generally tax free |
Lost In Your Crypto Tax Chaos?
We’ll organise everything, reports, gains, losses.
How Are Different Crypto Transactions Taxed in the UK?
Different crypto activities are taxed in different ways in the UK. HMRC focuses on the nature of each transaction to decide whether Capital Gains Tax, Income Tax, or no tax applies.
Tax on Buying Cryptocurrencies with Fiat Currency
Buying cryptocurrency using fiat currency such as GBP is not a taxable event in the UK. HMRC does not charge tax at the point of purchase. However, you must keep accurate records of the purchase price and any related fees, as these form the cost basis for future calculations.
Example:
Emma buys £2,000 worth of Bitcoin using her bank account. No tax is due at the time of purchase. The £2,000 becomes her cost basis, which will be used to calculate Capital Gains Tax if she sells or swaps the Bitcoin later.
Tax on Holding Crypto
Holding cryptocurrency without selling, swapping, or spending it does not trigger any tax in the UK. HMRC does not tax unrealised gains, so changes in market value alone have no tax impact while the assets remain untouched in your wallet.
Example:
James buys Ethereum and keeps it in his personal wallet for 2 years without making any transactions. Even though the value of his ETH rises during this period, no tax is due until he disposes of it.
Tax on Transferring Crypto Between Your Own Wallets or Exchanges
Moving cryptocurrency between wallets or exchanges that you personally own is tax free in the UK. HMRC does not treat internal transfers as disposals. However, any network or gas fees paid during the transfer can trigger a taxable event and must be reviewed separately.
Example:
Liam transfers 0.5 ETH from his personal wallet to an exchange account he controls. The transfer itself is not taxed. If he pays a £5 gas fee, that fee is treated as a disposal, and he must calculate whether it results in a capital gain or loss based on cost basis.
Tax on Selling Crypto For Fiat
Selling cryptocurrency for fiat currency such as GBP is treated as a disposal by HMRC. If the value of the crypto has increased since you acquired it, the profit is subject to Capital Gains Tax after applying any available allowance.
Example:
Mathew buys 1 ETH for £2,500. He later sells the same ETH for £4,000. The difference of £1,500 is his capital gain, which may be taxable depending on his total gains for the year.
Tax on Crypto-to-Crypto Swaps
Swapping one cryptocurrency for another is treated as a taxable disposal in the UK. HMRC does not distinguish between different asset types, so trades involving coins, tokens, stablecoins, or NFTs can all trigger Capital Gains Tax.
Example:
Daniel swaps Bitcoin for Ethereum when the value of his Bitcoin is higher than its purchase price. The difference between the market value at the time of the swap and the original cost becomes a taxable capital gain.
Tax on Spending Crypto On Goods and Services
Spending cryptocurrency is treated as a disposal under UK tax rules. When you use crypto to pay for goods or services, HMRC views this as giving up an asset, which can create a capital gain or a capital loss based on value changes.
Example:
Sophie buys a laptop using Bitcoin she originally purchased for £1,200. At the time of payment, the Bitcoin is worth £1,800. She has a £600 capital gain, which may be subject to Capital Gains Tax after applying her annual allowance.
Tax on Mining Cryptocurrencies
Mining crypto in the UK can be taxed in different ways depending on how the activity is carried out. HMRC looks at factors such as scale, organisation, and intent to decide whether mining is a hobby or a business.
Mining as a Hobby
When mining is done on a small or casual scale, rewards are treated as “miscellaneous income”. Income Tax applies based on the market value of the crypto when received. If the mined tokens are later sold or swapped, Capital Gains Tax may also apply.
Example:
Daniel mines crypto occasionally at home and receives tokens worth £600. This amount is taxed as income. If he later sells the tokens for £900, the £300 increase may be subject to Capital Gains Tax.
Mining as a Business
If mining is organised and carried out commercially, rewards are treated as trading income. Income Tax applies to profits after allowable expenses. National Insurance contributions may also be due depending on the circumstances.
Example:
Amina runs a dedicated mining setup and earns £25,000 in mining rewards during the year. Let’s say she incurred an expense of £2,000. After deducting allowable expenses, the remaining income i.e., £23,000 is taxed as business income.
Tax on Staking Cryptocurrencies
Staking rewards are usually taxed as income in the UK based on their market value when received. The value of staking rewards in pound sterling at the time they are credited to your wallet is subject to Income Tax. This applies whether rewards are received daily, weekly, or at irregular intervals.
Example:
Olivia receives staking rewards worth £750 during the year. The £750 is taxed as income. If she later sells those tokens for £900, the £150 difference may be subject to Capital Gains Tax.
Tax on Liquid Staking
Some staking arrangements involve exchanging one token for another, such as liquid staking. In these cases, HMRC may treat the transaction as a crypto to crypto trade, which can trigger Capital Gains Tax at the point of staking.
Example:
James stakes ETH through a liquid staking protocol and receives a staking token in return. This exchange may be treated as a taxable disposal, even though his ETH remains locked.
Tax on Airdrops
Airdrops are usually taxed as income in the UK when they are received. HMRC looks at whether you took any action to qualify for the tokens, such as using a platform or completing a task. Later disposals can also trigger Capital Gains Tax.
Example:
Ryan receives 300 tokens from an airdrop after using a DeFi platform. The tokens are worth £900 on the day he receives them, so £900 is taxed as income. He later sells the tokens for £1,050, resulting in a £150 capital gain.
Tax on Hard Forks
Tokens received from a hard fork are not taxed as income in the UK. HMRC treats these tokens as having a cost basis linked to the original holdings on the previous blockchain. Tax only arises if you later dispose of the forked tokens.
Example:
Ethan holds crypto that undergoes a hard fork and receives new tokens at no cost. No tax is due at receipt. If he later sells the new tokens for £600, that disposal may trigger Capital Gains Tax based on the allocated cost basis.
Tax on Crypto Loans
Crypto lending can trigger tax at more than one stage. HMRC focuses on the nature of the reward you receive and whether ownership of the crypto changes when you enter or exit a loan position.
Tax on Lending Rewards
Lending rewards are not automatically treated the same way for tax purposes. If the reward is paid regularly by a platform or borrower and the amount is fixed or agreed in advance, it is usually taxed as miscellaneous income. If the reward depends on the asset’s value increasing and is realised later, it may be treated as a capital gain.
Example:
Nina lends crypto through a lending platform and receives weekly rewards worth £400 over the year. Because the rewards are paid periodically for providing a service, the £400 is taxed as income.
Tax When Entering or Exiting a Loan
Capital Gains Tax may apply when you enter or exit a crypto loan if beneficial ownership of the tokens transfers. If ownership does not transfer, no disposal occurs and rewards are taxed as income. If ownership does transfer, entering and exiting the loan is treated as a taxable disposal.
Example:
Alex deposits crypto into a lending protocol where ownership transfers to the platform. When the loan starts and ends, each movement may be treated as a disposal, requiring Capital Gains Tax calculations based on market value.
Attention Readers: HMRC is actively reviewing how crypto lending and DeFi should be taxed. It has released a summary of responses. While no law has changed yet, HMRC is considering treating lending or staking entries as no gain, no loss events, with Capital Gains Tax applying only when the asset is ultimately disposed of.
Tax on Gifting Cryptocurrencies
Gifting cryptocurrency can trigger tax depending on who receives the assets. HMRC treats most gifts as disposals, with specific relief available for transfers between spouses and civil partners.
Gift to Spouse and Civil Partners
Gifting crypto to a spouse or civil partner is tax free in the UK. No Capital Gains Tax is charged at the time of transfer, and there is no limit on the value that can be gifted. The recipient inherits the original cost basis.
Example:
Tom gifts 1 ETH to his civil partner instead of selling it. No tax is due at the time of the gift. When the partner later sells the ETH, they calculate any capital gain using the original purchase cost.
Gift to Others
Gifting crypto to anyone other than a spouse or civil partner is treated as a disposal at market value. Capital Gains Tax may apply on any gain. If Income Tax was already paid on the gifted tokens, the taxable proceeds are reduced accordingly.
Example:
Laura gifts crypto worth £3,000 to a friend. If the crypto cost her £1,800, the £1,200 increase is treated as a capital gain and may be taxable after applying allowances.
Tax on Donating Cryptocurrencies
Donating cryptocurrency to a UK registered charity is usually tax free. You can receive tax relief on the donated amount and avoid Capital Gains Tax, provided the donation is genuine and no personal benefit is received in return. A donation becomes tainted if there is any arrangement where the donor receives a personal or financial benefit, either directly or indirectly. In such cases, the donation is not tax deductible, and Capital Gains Tax relief may be denied.
Example:
Rachel donates crypto worth £1,200 to a registered charity. She originally bought the crypto for £600. No Capital Gains Tax is due, and she can claim tax relief on the £1,200 donation.
Tax on Crypto Margin Trading
Profits from crypto margin trading are subject to Capital Gains Tax in the UK. Tax applies when a position is closed, as this is treated as a disposal. Forced liquidations are also considered taxable events.
Example:
Tom opens a margin trade and realises a £2,500 profit when he closes the position. The £2,500 is treated as a capital gain and may be taxed after applying his annual Capital Gains Tax allowance.
Tax on Crypto Derivative Trading
Crypto derivatives and futures are generally not taxed for most UK retail investors. The FCA restricts access to these products, placing many outcomes in a legal grey area. Profits from spread betting are usually treated as gambling activity, which means private investors do not pay Capital Gains Tax on those profits.
How are Business Trading in Cryptocurrency Attract Taxation?
Crypto activity is usually taxed under personal Capital Gains or Income Tax rules. However, when trading becomes organised, frequent, and commercial, HMRC may treat it as a business, which changes how taxes are applied and reported.
When Crypto Activity Is Treated as a Business?
HMRC looks at the overall nature of the activity rather than a single factor. Crypto trading may be treated as a business when there is clear commercial intent, structured operations, and ongoing profit seeking. Indicators can include frequent transactions, active risk management, use of specialist tools, and organised record keeping.
Common signs HMRC may consider include:
- High volume and regular trading activity
- A structured approach similar to traditional trading businesses
- Use of borrowed funds or reinvested profits
- Time spent managing positions and strategies
Taxes That May Apply to Crypto Businesses
When crypto trading is treated as a business, profits are usually taxed as trading income rather than capital gains.
- Income Tax on Trading Profits: When crypto activity is treated as a business, profits are taxed as trading income rather than capital gains. This applies to individuals operating as sole traders or partnerships.
- Corporation Tax for Companies: If crypto trading is carried out through a registered company, profits are subject to Corporation Tax instead of Income Tax.
- National Insurance Contributions: Individuals trading crypto as a business may also need to pay National Insurance, depending on how the activity is structured and reported.
- Value Added Tax Considerations: VAT does not usually apply to buying or selling crypto itself, but it may apply to fees charged for services linked to crypto activity.
- Other Possible Taxes: In limited cases, Stamp Duties or other charges may apply, depending on the nature of the underlying transaction rather than the crypto asset itself.
Note: HMRC provides guidance for business crypto activity under its Business Income Manual (BIM 56800). This outlines how trading profits should be calculated, which expenses may be deductible, and how income should be reported.
How are NFTs Taxed in the UK?
NFTs are taxed based on how you acquire, use, and dispose of them. HMRC treats NFTs as individually identifiable assets, which means their tax treatment differs from standard cryptocurrencies and depends on whether the activity is investment based, income related, or business driven.
NFT Activity | Tax Treatment |
Buying an NFT with fiat | No tax at purchase |
Buying an NFT with crypto | Capital Gains Tax on the crypto used |
Selling an NFT | Capital Gains Tax on the profit |
Swapping one NFT for another | Capital Gains Tax |
Holding NFTs | No tax while held |
NFT pooling rules | Not applicable, each NFT is assessed individually |
Earning NFTs through airdrops or rewards | Income Tax based on value at receipt |
Play to Earn or similar NFT rewards | Income Tax in most cases |
Financial trading in NFTs | Income Tax and National Insurance may apply |
Creating and selling own NFTs | Income Tax as trading income |
Minting an NFT | Not taxable at minting stage |
Selling minted NFTs | Income Tax on business profits |
Disposing NFTs received as income | Capital Gains Tax may apply |
Also Read: Are You Liable To Pay Tax On NFTs In UK?
How are DeFi Transactions Taxed in the UK?
DeFi transactions are not taxed under a single rule in the UK. HMRC focuses on what each transaction achieves in practice, rather than the technology used. The tax outcome depends on whether the activity looks like earning income or disposing of a capital asset.
DeFi Transaction Type | Tax Treatment |
Swapping tokens on DeFi platforms | Capital Gains Tax |
Adding liquidity and receiving LP tokens | Capital Gains Tax |
Removing liquidity from pools | Capital Gains Tax |
Earning staking rewards | Income Tax |
Receiving yield or interest from lending | Income Tax |
Liquidity mining rewards | Income Tax |
Depositing assets into lending protocols | Capital Gains Tax in some cases |
Exiting lending or staking positions | Capital Gains Tax in some cases |
Note: HMRC’s DeFi Consultation states that DeFi should be taxed. Future changes may treat certain deposits into lending or staking protocols as tax free at the point of entry, but current legislation remains unchanged.
How To Calculate Crypto Taxes in the UK?
Calculating crypto taxes in the UK starts with separating income from capital gains. HMRC expects each to be calculated using different rules, based on when the crypto is received and how it is later used or disposed of.
Calculating Income Tax
Crypto income is calculated using the fair market value in GBP on the date you receive the tokens. This applies to staking rewards, mining income, airdrops earned through actions, DeFi yield, and crypto received as payment.
Income Tax Formula:
Taxable Crypto Income = Fair Market Value in GBP on Date of Receipt |
Manually tracking income across multiple wallets and platforms increases the risk of errors. KoinX’s crypto tax calculator automatically tracks transactions and applies UK income tax rules correctly.
Calculating Capital Gains Tax
Capital gains arise when you dispose of crypto by selling, swapping, spending, or gifting it. HMRC uses the following calculation to determine gains or losses.
Capital Gains Tax Formula
Capital Gain or Loss = Disposal Proceeds – Cost Basis |
- Disposal Proceeds are the fair market value in GBP on the date of disposal.
- Cost Basis includes the original acquisition cost plus allowable transaction fees, calculated using HMRC’s pooling rules.
KoinX’s profit calculator helps apply these rules correctly, calculates gains and losses for each disposal, and accounts for allowances and carried forward losses automatically.
Accepted Cost Basis Methods in the UK
HMRC uses a specific share pooling system to calculate the cost basis of cryptocurrency disposals. Unlike other countries that allow FIFO or LIFO methods, the UK requires investors to apply matching rules in a fixed order to determine gains or losses accurately.
Average Cost per Unit (Share Pooling)
Under share pooling, all units of the same crypto asset are grouped together, and an average cost per unit is calculated. This average is then used as the cost basis when assets are sold, unless another rule takes priority.
Example:
- You buy 0.5 BTC at £50,000 and later buy another 0.5 BTC at £60,000.
- The average cost per unit becomes £55,000.
- If you sell BTC later, £55,000 is used as the cost basis per BTC.
Cost Basis Rules in the UK
For fair calculation of the cost basis, HMRC has drafted cost basis rules. These rules must be applied in the following order:
The Same Day Rule
If you buy and sell the same crypto on the same day, HMRC requires you to use the cost of that day’s purchase as the cost basis. This rule exists to prevent short term loss manipulation.
Example:
You buy 1 BTC for £60,000 and sell 1 BTC later the same day for £60,500. The cost basis used is £60,000, not the price of any earlier purchases.
The 30 Day Rule (Bed and Breakfast Rule)
If you sell crypto and buy the same asset again within 30 days, the repurchase price is used as the cost basis for the earlier sale. This rule limits loss harvesting strategies.
Example:
You sell 1 BTC for £60,000 and buy 1 BTC again five days later for £62,000. The cost basis for the sale is £62,000, not the original purchase price.
Section 104 Pool
If neither the Same Day Rule nor the 30 Day Rule applies, HMRC requires you to use the Section 104 pool. This averages the cost of all previous purchases of that asset.
The Same Day Rule
You buy BTC at £50,000, £52,000, and £57,000 across different dates. The average cost becomes £53,000. If you sell BTC later, £53,000 is used as the cost basis.
How To Report Crypto Taxes in the UK?
Crypto taxes in the UK are reported through the Self Assessment system. HMRC expects you to separately disclose crypto income and capital gains using the correct forms and maintain supporting records in case of review.
Forms to File to Report Crypto Taxes in the UK
Here’s a list of forms, which you need to fill to report cryptocurrencies in the UK:
SA100 Self Assessment Tax Return
The SA100 is the main tax return used to report your overall income. Crypto income such as staking rewards, mining income, airdrops earned through actions, and payments received in crypto must be included here.
SA108 Capital Gains Summary
The SA108 form is used to report capital gains and losses from crypto disposals. This includes selling, swapping, spending, gifting crypto, and certain DeFi transactions. You must report total gains, allowable losses, and any reliefs claimed.
Records to Keep To File Crypto Taxes in the UK
HMRC requires detailed records to support your tax return. You should keep:
- Dates of all crypto transactions
- Type of crypto asset involved
- Number of units bought, sold, or received
- GBP value at the time of each transaction
- Wallet addresses and exchange accounts used
- Transaction IDs and blockchain records
- Fees paid for purchases, sales, and transfers
- Records of staking, mining, airdrops, and DeFi rewards
These records must be kept for at least 6 years and may be requested by HMRC during an enquiry.
How To Legally Lower Crypto Taxes in the UK?
You cannot avoid paying tax on crypto, but the UK tax system allows several legal ways to reduce cryptocurrency taxes. The key is planning ahead and using the allowances and reliefs HMRC already provides.
Use Available Tax Free Allowances
The UK offers multiple allowances that can reduce your crypto tax liability. This includes the £3,000 Capital Gains Tax allowance, the £12,570 personal income tax allowance, and the £1,000 trading or property allowance where applicable. Using these thresholds carefully can lower or even eliminate tax in some cases.
Harvest Capital Losses
If your crypto assets fall in value, selling them can create a capital loss. These losses can be used to offset taxable gains from other disposals in the same year or carried forward to future years. This approach, often called loss harvesting, can significantly reduce Capital Gains Tax when used correctly.
Donate or Gift Crypto Strategically
Donating crypto to a registered UK charity is usually exempt from Capital Gains Tax and may also qualify for tax relief. Gifting crypto to a spouse or civil partner is also tax free, allowing couples to use both individuals’ tax free allowances more efficiently.
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How KoinX Can Help You With Crypto Taxes in the UK?
Tracking crypto taxes in the UK becomes difficult once you use multiple wallets, exchanges, or DeFi platforms. Missing transactions, incorrect valuations, and manual calculations often lead to reporting errors. KoinX solves this by automating crypto tax calculations and helping UK investors stay accurate, compliant, and prepared for HMRC reporting.
Seamless Integration Across Platforms
KoinX automatically tracks transactions across more than 800 blockchains, wallets, and exchanges. It detects transfers between platforms, captures complete transaction histories, and removes the need for manual imports or spreadsheets.
Accurate and HMRC Compliant Tax Reports
KoinX applies UK specific tax rules to every transaction type. It correctly categorises income and capital gains, applies pooling rules, allowances, and loss offsets, and generates HMRC ready tax reports aligned with Self Assessment requirements.
Portfolio Insights in One Dashboard
KoinX gives you a clear view of your entire crypto portfolio in one place. You can monitor holdings, allocation, and performance across platforms, making it easier to understand tax exposure and plan disposals more effectively.
Safe and Secure by Design
Security remains a priority at KoinX. With end to end encryption and strong data protection practices, your transaction data and personal information remain private and secure at all times.
If you want accurate calculations and stress free crypto tax reporting in the UK, start using KoinX to track, calculate, and file your crypto taxes with confidence.
Conclusion
Crypto taxes in the UK rely on understanding how HMRC treats different transactions, applying the correct tax rules, and reporting everything on time. Capital gains, income, allowances, losses, and record keeping all play a role in staying compliant and avoiding penalties. With increased data sharing and closer scrutiny, accuracy now matters more than ever.
Managing this manually across wallets, exchanges, and DeFi platforms increases the risk of mistakes. KoinX simplifies the process by tracking transactions, applying UK tax rules, and generating HMRC ready reports. If you want clarity, control, and confidence when filing your crypto taxes, join KoinX today to get a practical and reliable crypto tax solution.
Frequently Asked Questions
How Much Crypto Can I Withdraw Without Paying Taxes?
You can realise up to £3,000 in capital gains in a tax year without paying Capital Gains Tax. This is not based on withdrawal amount but on total gains after disposals. Income from crypto follows the £12,570 personal allowance, subject to conditions.
Which Crypto Exchange Does Not Report To Taxes?
There is no crypto exchange that guarantees non reporting in the UK. Most regulated platforms share user and transaction data with HM Revenue and Customs. From 2026, reporting requirements expand further, making reliance on non reporting platforms risky.
Is Crypto Traceable In the UK?
Yes, crypto is traceable in the UK. HMRC uses exchange data, KYC records, blockchain analysis, and historical transaction information to identify crypto activity. Wallet movements may appear anonymous, but links to verified accounts allow HMRC to connect activity to individuals.
What If I Don’t Report Cryptocurrency in the UK?
If crypto is not reported, HMRC penalties depend on behaviour. Honest mistakes can be reviewed up to 4 years, careless reporting up to 6 years, and deliberate concealment up to 20 years. HMRC also offers voluntary disclosure to correct past errors.
What Is the 30 Day Rule In Cryptocurrencies in the UK?
The 30 day rule applies when you sell crypto and buy the same asset again within 30 days. HMRC requires the repurchase price to be used as the cost basis for the sale, limiting loss harvesting through quick buy back strategies.
Do I Pay Tax On Crypto If I Don’t Sell It?
Holding crypto without disposing of it does not trigger tax. However, Income Tax may still apply if you earn crypto through staking, mining, airdrops earned through actions, or payments. Tax depends on receipt of value, not just selling.