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Cryptocurrencies and crypto assets are more popular today than they have ever been, especially here in the UK. The numbers surrounding the adoption of digital currencies have been rising across different demographics, from first-time investors to full-time traders and even long-time sceptics. But as more people get involved, the UK’s tax authority is taking a closer look, especially when it comes to the growing need for crypto tax compliance.
So, in this guide, we’ll break down what the UK crypto tax scene looks like, how it works, what exactly is taxable, what’s not, and what you need to do to stay on the right side of the law.
Please note: This guide is for informational and educational purposes only. Crypto tax rules can be complex and subject to change. Always consult a qualified tax advisor or financial professional to assess your specific situation and ensure you’re meeting all legal requirements.
Is crypto taxable in the UK?
The short answer is… yes, but it depends.
There’s no specific “crypto tax” law in the UK. Instead, HMRC treats crypto assets (including cryptocurrencies) as property, not currency. So rather than creating a brand-new tax category, crypto is taxed under existing rules, just like shares or investment property.
That means most people dealing with crypto will be affected by either Capital Gains Tax (CGT) or Income Tax (IT) or even both, depending on how they interact with their assets. So, whether you’re holding long-term, flipping tokens regularly, or earning passive rewards, how you use crypto determines how you’re taxed. And yes, HMRC expects you to keep proper records, no matter how big or small your portfolio is.
Understanding when capital gains tax applies
When it comes to getting taxed on your crypto activity, CGT usually comes into play when you dispose of crypto assets. However, what “disposal” means according to HMRC is broader than just selling crypto.
Here are the different ways that you could trigger CGT:
- Sell crypto for fiat currency (like GBP)
- Swap one crypto asset for another (e.g., converting ETH to BTC)
- Use crypto to pay for goods or services
- Gift crypto to someone (except your spouse or civil partner)
Even if you’re not running a full-scale crypto business, perhaps you’re just an individual investor, you could still be liable for CGT when you make gains on disposals. And if you’re actively involved in trading cryptocurrencies, even as a solo investor, your gains may be subject to CGT. That’s why using reliable crypto trading platforms that offer downloadable reports and transaction history can make tax season a lot smoother.
Here are the current Capital Gains Tax rates for the 2025/26 tax year:
- 18% for basic rate taxpayers
- 24% for higher and additional rate taxpayers
- Annual CGT exemption: £3,000
This means your first £3,000 of gains in a tax year are tax-free. Anything above that is taxed at the appropriate rate, depending on your total income.
Then there are the less fortunate moments, like when you sell a crypto asset or token for less than what you paid for it. That’s called a capital loss, and it shouldn’t be ignored. You can offset those losses against your gains, and if you don’t use them all in one year, you can carry them forward to lower your CGT bill in future tax years, as long as you report them.
When does income tax apply?
In the cryptocurrency context, Income Tax applies when you’re earning crypto rather than buying or investing. If you receive crypto as a form of income, whether from work, rewards, or decentralized finance (DeFi); HMRC treats it just like any other form of earnings.
Here’s when Income Tax comes into play:
- Mining, staking, and airdrops (especially if they’re in exchange for effort or services)
- Getting paid in crypto for work, freelance services, or as part of a salary
- DeFi income, such as earnings from liquidity pools, yield farming, or lending platforms
In most cases, this income is reported under miscellaneous income and taxed at your usual Income Tax rate:
- 20% for basic rate taxpayers
- 40% for higher rate
- 45% for additional rate
You may also be eligible for a £1,000 trading allowance, which can be used to offset low-level crypto earnings, but this doesn’t apply if you’re also claiming business expenses.
In rare cases, if you’re frequently buying and selling crypto in a way that resembles a business, HMRC may classify you as a financial trader. In that case, your profits would be taxed as self-employment income, and you’d also owe Class 2 and Class 4 National Insurance.
What crypto transactions are tax-free?
Not everything in the crypto world triggers a tax bill. Some activities are tax-free, at least for now.
You won’t pay Capital Gains Tax or Income Tax on:
- Buying crypto with GBP (you’re not taxed until you dispose of it)
- Holding crypto (even if the value goes up, there’s no tax until you sell)
- Transferring crypto between your own wallets or exchanges
- Gifting crypto to your spouse or civil partner
- Donating crypto to registered UK charities (these may qualify for CGT relief)
These are all considered neutral actions from a tax perspective. But still, keep records, because you’ll need them to prove what happened if HMRC asks.
How to file your UK crypto taxes
Here’s what you need to know when it’s time to report:
- UK tax year runs from 6 April to 5 April the following year
- File via HMRC’s Self Assessment system
- Report capital gains using the SA108 form
- Report crypto income on the SA100 form, specifically Boxes 17 and 18
- Deadline for online filing: 31 January after the end of the tax year
- Keep full records of all crypto transactions, dates, values in GBP, wallet addresses, fees, and platforms used.
Proactive crypto tax planning matters
Crypto might feel fast, flexible, and modern, but HMRC has its own rules for handling it. So whether you’re buying, selling, staking, or just holding, your tax responsibilities are as real as ever, and ignoring them can cost you a lot. The good news is that staying compliant isn’t that complicated. With the right knowledge and tools, you can track your transactions, plan ahead, and avoid being caught out later.
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