If you have bought, sold, or earned cryptocurrency in the UK, you might be wondering if you need to pay tax on it. Many people think crypto is outside the tax system, but that is not true. HMRC has clear rules on how crypto is taxed, and it treats it like property, not currency.

So, understanding crypto taxes can feel confusing at first, but there are different rules depending on what you did with your crypto. Whether you made a profit from trading or earned rewards through staking or mining, you could have a tax bill waiting. You do not want to ignore it, because failing to report crypto taxes can lead to penalties.

This UK crypto tax guide will cover whether you need to pay tax, the difference between capital gains and income tax, examples of taxable transactions, tax rates and allowances, how to report to HMRC, ways to reduce your tax bill, and common questions. 

Do You Pay Tax on Crypto in the UK?

In the UK, cryptocurrency is treated as a capital asset by the HM Revenue and Customs (HMRC), and yes, you may need to pay taxes depending on your activities. HMRC’s guidance on cryptoassets explains that there are two main taxes to consider: Capital Gains Tax (CGT) and Income Tax.

For Capital Gains Tax, you’ll pay if you make a profit when you sell, swap, spend, or gift crypto (except to your spouse). Everyone gets a tax-free allowance for CGT, which for the 2024/25 tax year is £3,000. If your total gains in a year are above this, you’ll pay CGT on the excess. The rate depends on your income tax bracket: 18% if you’re a basic rate taxpayer (income up to £50,270) or 24% if you’re a higher or additional rate taxpayer (income over £50,270).

For Income Tax, you’ll pay if you earn crypto through activities like mining, staking, or getting paid in crypto for work. These are treated as income, and you’ll pay based on your income tax band. There’s a tax-free personal allowance of £12,570. Read our guide on how to buy cryptocurrency in the UK.

Note: You need to keep detailed records of all your crypto transactions, like buy/sell dates, values in GBP, and wallet addresses, because HMRC might ask for them.

Capital vs. Income

Here’s a table showing what crypto transactions fall under Capital Gains Tax and what falls under Income Tax:

Capital Gains Tax	Income Tax
Selling crypto for fiat	Employee remuneration
Swapping crypto	Mining rewards
Spending crypto	Bounties
Gifting crypto (unless it’s to your spouse)	Staking rewards
Selling NFTs	Lending rewards
	Liquidity mining rewards

When comparing the two, Capital Gains Tax applies to transactions where you’re disposing of your crypto and making a profit, like selling it for pounds, swapping one crypto for another, or even spending it to buy something. It’s all about the gain you make when you let go of the asset.

On the other hand, Income Tax kicks in when you’re earning crypto as a form of income, such as getting paid in crypto for a job, receiving mining rewards, or earning through staking or lending. The key difference is that CGT focuses on profits from selling or using your crypto, while Income Tax treats crypto you earn as part of your regular earnings.

Can HMRC Track Crypto?

Yes, HMRC can track cryptocurrency transactions in the UK, and they’ve got several ways to do it. Since crypto operates on public blockchains, every transaction is recorded on a transparent ledger. 

HMRC uses advanced blockchain analysis tools, like those from Chainalysis, to trace funds from one wallet to another, even if users try to hide with mixers like Tornado Cash, which aren’t foolproof. They also request data from crypto exchanges, which follow Know Your Customer (KYC) rules, linking your identity to transactions.

For example, exchanges like Coinbase have shared user data for transactions over £5,000. HMRC’s Connect system pulls info from banks, international tax agreements, and even whistleblowers to spot undeclared crypto gains. Starting January 2026, the Crypto Asset Reporting Framework (CARF) will also make exchanges report user activity directly to HMRC, closing more loopholes. They can also investigate if you’re flagged for suspicious activity, like underreporting gains on your tax return.

Capital Gains Tax for Crypto in the UK

If you’re buying, selling, or doing anything with crypto that makes you a profit, you might need to pay this capital gains tax. The UK tax authority HMRC sees crypto like Bitcoin as an asset, not actual money. So when you make a profit by getting rid of your crypto, you’ll likely owe Capital Gains Tax or CGT.

HMRC has clear rules on this in their Cryptoassets Manual. They treat crypto like other investments, such as stocks. You make a gain or loss when you dispose of your crypto.

Keeping Records and Filing

You need to keep track of all your crypto transactions. Here’s what to record:

• Date of each transaction
• Amount of crypto involved
• Value in GBP at the time
• Cost basis and any fees

HMRC can ask for these records, and some exchanges don’t keep them long. Tools like Koinly or CoinLedger can help by pulling your transaction history and calculating your gains or losses.

Capital Gains Tax Rates

Let’s look at how much CGT you’ll pay on your crypto gains. The rate depends on your total income for the year since CGT is linked to your income tax band. HMRC changed the CGT rates in the Autumn Budget 2024 for disposals after October 30, 2024. Before that, the rates were 10% for basic rate taxpayers and 20% for higher and additional rate taxpayers. Now they’re higher at 18% and 24%.

Here’s how it breaks down for the 2024/25 tax year:

• If your taxable income after allowances is between £12,571 and £50,270, you’re in the basic rate band. You’ll pay 18% CGT on your gains.
• If your income is between £50,271 and £125,140, you’re in the higher rate band and you’ll pay 24%.
• If your income is over £125,140, you’re in the additional rate band and you’ll still pay 24%.

Crypto Transactions That Fall Under Capital Gains Tax

Not every crypto transaction means you’ll pay CGT, but many do. HMRC says a disposal is when you part with your crypto, and ownership changes. Here’s what counts as a disposal:

• Selling crypto for fiat currency like GBP. If you bought Ethereum for £2,000 and sold it for £5,000, your gain is £3,000.
• Swapping one crypto for another. If you trade 1 Bitcoin for 20 Ethereum, you calculate the gain by taking the value of the Ethereum in GBP minus the cost basis of the Bitcoin. If Ethereum is worth £30,000 and your Bitcoin cost basis was £10,000, your gain is £20,000.
• Spending crypto to buy something. If you use Bitcoin to buy a laptop worth £1,000, you calculate the gain based on the Bitcoin’s value at the time compared to what you paid for it.
• Gifting crypto to someone who’s not your spouse or civil partner. If you give a friend 1 Bitcoin worth £20,000 and your cost basis was £5,000, your gain is £15,000.
• Selling NFTs. If you sell an NFT for £2,000 that you bought for £500, your gain is £1,500.

Capital Gains Tax isn’t triggered by some of the things. Holding crypto without doing anything doesn’t incur tax. You will only pay tax when you dispose of it. 

Transferring crypto between your own wallets is also tax-free since you aren’t changing ownership. Buying crypto with GBP doesn’t incur tax either, but you should keep track of the cost basis for later. Also, gifting to your spouse or civil partner is tax-free, which can help if they have a lower tax band.

Crypto Capital Losses

What if you lose money on your crypto? You can use those losses to lower your tax bill, which is a nice perk. If you sell or dispose of your crypto for less than your cost basis, you’ve made a capital loss. HMRC lets you use these losses to reduce your gains, which lowers your CGT.

Here’s an example. You made a £10,000 gain from selling Bitcoin, but sold some Ethereum at a £4,000 loss. Your net gain is £10,000 minus £4,000, which is £6,000. Now subtract your £3,000 CGT allowance for the 2024/25 tax year. That leaves £3,000 to tax instead of £7,000 without the loss. If you’re in the basic rate band at 18%, you’d owe £540 in tax instead of £1,260.

Carrying Losses Forward:

If your losses are more than your gains, you can carry the extra losses forward to future years. For example, if you have £8,000 in losses and £3,000 in gains, your net gain is zero, and you have £5,000 in losses left. You can use that £5,000 to offset gains in the next tax year or later. However, you must report these losses to HMRC within four years of the tax year in which they occurred.

If your crypto becomes worthless, for instance, if a coin’s value drops to zero, you can make a negligible value claim with HMRC. This allows you to treat it as if you sold it for zero, so you can claim a loss. If you bought a coin for £2,000 and it’s now worth nothing, you can claim a £2,000 loss. However, if your crypto was stolen or lost, HMRC does not consider that a disposal, so you cannot claim a loss for theft.

You can also use tax-loss harvesting to save on taxes. This means selling crypto at a loss on purpose to offset gains. If you sell and buy back the same crypto within 30 days, HMRC adjusts the cost basis to stop you from claiming artificial losses. Keeping good records of your losses is key so that you can prove them to HMRC if they ask.

Income Tax for Cryptocurrency

As discussed above, the HMRC treats crypto as a digital asset, which means it’s subject to specific tax rules, including income tax when you earn crypto in certain ways. This guide will walk you through the forms of cryptocurrency income, the tax rates that might apply, and the types of transactions that trigger income tax.

Forms of Cryptocurrency Income

In the UK, HMRC considers certain crypto-related activities as generating taxable income. This isn’t about profits from selling or trading crypto (that’s usually Capital Gains Tax territory); it’s about earning crypto in ways that count as income, like getting paid in Bitcoin or receiving rewards for crypto activities. 

Here are the main forms of cryptocurrency income that HMRC taxes:

• Getting Paid in Crypto for Work or Services: If you’re paid in cryptocurrency for a job, whether it’s freelancing, consulting, or selling goods or services, it’s treated like regular cash wages. For example, if a client pays you 0.1 Bitcoin for designing their website, the fair market value of that Bitcoin in GBP on the day you receive it counts as taxable income.
• Mining Rewards: Crypto mining involves using powerful computers to solve complex math problems to validate transactions on a blockchain. If you mine Bitcoin or other cryptocurrencies, the coins you earn as rewards are considered income. The taxable amount is the GBP value of the coins at the time you receive them.
• Staking Rewards: Staking is when you lock up your crypto to help secure a blockchain network (like Ethereum 2.0) and earn rewards in return. These rewards, whether in the same crypto or a different token, are treated as income.
• Airdrops: Airdrops are free tokens sent to your wallet, often as part of a crypto project’s promotion. If you receive an airdrop for doing nothing (like just holding a certain coin), it’s usually not taxable as income. But if you get an airdrop for performing a service, like promoting a project on social media, it’s considered taxable income based on the GBP value when you receive the tokens.
• DeFi and Yield Farming: Decentralized finance (DeFi) activities, like yield farming or providing liquidity to a pool, can generate rewards that HMRC treats as income. For example, if you stake tokens in a liquidity pool and earn interest or new tokens, those earnings are taxed as income at their market value when received.
• Crypto as Employment Income: If your employer pays part of your salary in crypto, it’s treated like regular salary and subject to Income Tax and National Insurance Contributions (NICs) through the PAYE system.
• Miscellaneous Income: Any other crypto earnings that don’t fit neatly into the above categories, like referral bonuses or rewards from crypto platforms, are often classified as “miscellaneous income.” For example, if a crypto exchange gives you £50 worth of tokens for referring a friend, that’s taxable income.

Income Gains Tax Rates

In the UK, crypto income is taxed at the same rates as your regular income, based on your total taxable income for the year (including salary, crypto earnings, and other sources). For the 2024/2025 tax year, the Income Tax rates for England, Wales, and Northern Ireland are:

• Personal Allowance: £12,570 of income is tax-free (unless you earn over £125,140, which reduces the allowance).
• Basic Rate: 20% on income between £12,571 and £50,270.
• Higher Rate: 40% on income between £50,271 and £125,140.
• Additional Rate: 45% on income over £125,140.

Crypto Transactions That Fall Under Income Tax

Not every crypto transaction is subject to Income Tax—many are taxed under Capital Gains Tax instead (like selling or swapping crypto for profit). Here’s a rundown of the transactions that typically trigger Income Tax in the UK:

• Receiving crypto as payment
• Mining rewards
• Staking rewards
• Airdrops for services
• DeFi and liquidity pool rewards
• Crypto as salary or bonuses
• Referral or promotional bonuses

Non-Taxable Transactions

• Buying crypto with fiat (GBP): Just purchasing crypto isn’t taxable.
• Holding crypto: Keeping crypto in your wallet (HODLing) doesn’t generate income tax.
• Transferring crypto between your own wallets: Moving crypto from one wallet you control to another isn’t a taxable event.
• Gifting crypto to a spouse or civil partner: This is tax-free, though future disposals by them may trigger Capital Gains Tax.
• Donating crypto to a registered charity: Donations are usually tax-free, and you might get tax relief.

Additional Crypto Taxes

Two additional taxes – Value Added Tax (VAT) and Inheritance Tax (IHT) – can apply in specific situations. These taxes aren’t as common as CGT or Income Tax for most crypto investors, but they’re important to understand if you’re using crypto to buy goods or planning your estate.

Value Added Tax (VAT)

First, what is VAT? VAT is a consumption tax applied to goods and services in the UK. The standard VAT rate is 20%, though reduced rates (5% or 0%) apply to certain items.

If you use crypto to purchase goods or services, VAT is charged on the value of the goods or services, not the cryptocurrency itself. For example, if you buy a £1,000 laptop with Ethereum, the retailer charges 20% VAT (£200) on the laptop’s value, just as they would for a cash purchase. The crypto payment itself is not subject to VAT.

Also, services like crypto exchange fees, wallet services, or other intermediary activities may be subject to VAT, depending on their nature. In the UK, financial services are often VAT-exempt, but non-financial crypto services (e.g., consulting or software development for crypto projects) may incur VAT at 20%. For example, if you provide blockchain development services and charge in crypto, you may need to add 20% VAT to your invoice.

Inheritance Tax

Inheritance Tax is a tax on the estate (assets, including property, money, and investments) of someone who has died. In the UK, IHT applies if the total value of the estate exceeds the nil-rate band of £325,000. The standard IHT rate is 40%, though it can be reduced to 36% if 10% or more of the estate is left to charity.

How to Report Your Crypto Taxes to HMRC?

Step 1: Figure Out What You Need to Report

Check your crypto transactions to see what’s taxable. Income from mining, staking, airdrops for services, or crypto payments goes under Income Tax. Profits from selling or swapping crypto fall under Capital Gains Tax. Gather records of dates, amounts, and GBP values from your wallets or exchanges. Tools like Koinly or CoinTracking can help.

Step 2: Register for Self-Assessment

Sign up for Self-Assessment on the Government Gateway website if you’re not already registered. It’s quick, but do it at least 20 working days before the January 31, 2026, deadline for the 2024/2025 tax year. This is how you’ll report your crypto taxes.

Step 3: Fill Out the Right Forms

Log in to your Government Gateway account and complete the Self-Assessment tax return. Report crypto income (e.g., mining or staking) in Box 17 of the SA100 form as miscellaneous income. For crypto profits, use the SA108 form for Capital Gains Tax. Include GBP values and any expenses like mining costs.

Step 4: Submit and Pay by the Deadline

File your online tax return and pay any tax owed by January 31, 2026. Paper returns are due by October 31, 2025. Keep transaction records (dates, amounts, GBP values, wallet addresses) for five years in case HMRC checks.

HMRC Crypto Tax Deadline

The UK tax year runs from April 6, 2024, to April 5, 2025. You need to report crypto income (like mining, staking, or payments in crypto) and capital gains (from selling or swapping crypto) for this period. If you’re new to Self-Assessment, sign up on the Government Gateway website by October 5, 2025, to file online for the 2024/2025 tax year. This gives HMRC time to process your registration (about 10-20 days).

For online filing, submit by midnight on January 31, 2026. For paper returns, the deadline is October 31, 2025. Pay any tax owed by January 31, 2026, the same deadline as online filing. This includes Income Tax (20-45% based on your income band) and Capital Gains Tax (18% or 24% after October 30, 2024).

Crypto Tax Breaks

In the UK, you can legally reduce your crypto tax bill with a few handy tax breaks, based on HMRC’s rules for the 2024/2025 tax year.

1. First, the Personal Allowance lets you earn £12,570 tax-free, including crypto income like mining or staking rewards. If your total income is below this, you pay no Income Tax.
2. Second, the Trading Allowance gives you £1,000 tax-free for small crypto income, like mining or referral bonuses. If your crypto earnings are under £1,000, you might owe nothing, but you still report it. 
3. Third, the Capital Gains Tax (CGT) Allowance is £3,000 for 2024/2025, so you can make up to £3,000 in crypto profits (from selling or swapping) without paying CGT.
4. Fourth, gifting crypto to your spouse or civil partner is tax-free, letting you transfer assets without triggering CGT or Income Tax.

Is Any Crypto Tax-Free?

In the UK, not all crypto transactions are taxed, according to HMRC’s rules. Buying crypto with pounds and holding it in your wallet is tax-free, as it’s not a taxable event. Transferring crypto between your own wallets doesn’t trigger tax either. 

Gifting crypto to your spouse or civil partner is also tax-free, as HMRC allows tax-free transfers between them, though selling it later might trigger Capital Gains Tax (CGT). Donating crypto to a registered UK charity is another tax-free move, and you might even get tax relief.

How to Reduce Crypto Taxes in the UK?

• Use the CGT Allowance: You get a £3,000 tax-free allowance for Capital Gains Tax (CGT) in 2024/2025. Profits from selling or swapping crypto up to this amount are tax-free. Spread sales across years to maximize this.
• Claim the Trading Allowance: Earn up to £1,000 from crypto income like mining or staking without paying Income Tax. If your crypto earnings are below this, you owe no tax, but still report it.
• Deduct Allowable Expenses: Reduce taxable income or gains by claiming costs like mining electricity, hardware, or transaction fees. For example, £500 in mining costs lowers your taxable income by £500.
• Offset Losses: Use crypto losses to reduce taxable gains. If you lose £4,000 on Bitcoin but gain £6,000 on Ethereum, you only pay CGT on £2,000.
• Time Sales Strategically: Sell crypto in years when your income is low to stay in lower tax bands (20% vs. 40% for Income Tax, 10% vs. 20% for CGT).
• Keep Detailed Records: Track all transactions with dates, amounts, and GBP values for five years. Tools like Koinly simplify this and help calculate allowances accurately.

Conclusion

In a nutshell, navigating UK crypto taxes for the 2024/2025 tax year can seem daunting, but it’s manageable with the right know-how. You’ll face Income Tax on earnings like mining or staking, and Capital Gains Tax on profits from selling or swapping crypto.

You can reduce your tax bill using allowances (£3,000 for CGT, £1,000 for trading), deducting expenses, or offsetting losses. Always report via Self-Assessment by January 31, 2026, and keep records for five years. HMRC tracks transactions through exchanges, so compliance is key to avoiding penalties.

FAQs

Is the UK a crypto-friendly country?

The UK is moderately crypto-friendly but has strict tax rules. The UK supports crypto innovation, with a growing number of exchanges and blockchain startups, and the Financial Conduct Authority (FCA) regulates crypto businesses for consumer protection. 

However, HMRC taxes crypto heavily, treating it as property, not currency. You pay Capital Gains Tax (CGT) on profits and Income Tax on earnings like staking. While the UK encourages crypto use, strict compliance and high taxes mean it’s not as friendly as places like Dubai.

Which crypto exchanges report to HMRC?

The best UK crypto exchanges like Coinbase, Binance, Kraken, and Crypto.com share data with HMRC. HMRC has agreements with major UK-based crypto exchanges to access customer data like names, addresses, and transaction details for tax compliance. 

This started around 2021, with HMRC using Know Your Customer (KYC) records to track unreported gains. The upcoming CARF, effective January 2026, will require exchanges to report user transactions annually, covering UK and overseas platforms.

How to avoid UK crypto tax?

You can’t fully avoid crypto tax, but you can legally reduce it. There’s no way to dodge UK crypto taxes legally, as HMRC tracks transactions via exchanges. However, you can lower your bill: use the £3,000 CGT allowance for tax-free gains, claim the £1,000 trading allowance for crypto income, deduct expenses like mining costs, gift crypto to your spouse tax-free, or offset losses against gains.

When do I pay tax on crypto UK?

You pay tax when you earn crypto income or make gains, reported by January 31 each year. In the UK, you pay Income Tax when you earn crypto from mining, staking, airdrops for services, or payments, based on the GBP value when received. 

You report both via Self-Assessment, with online filings and payments due by January 31, 2026, for the 2024/2025 tax year. Paper filings are due October 31, 2025.

Which transactions are exempt from crypto taxes in the UK?

HMRC doesn’t tax certain crypto transactions: buying crypto with GBP, holding it (HODLing), or moving it between your own wallets are tax-free, as they’re not disposals. Gifting crypto to your spouse or civil partner is exempt from CGT and Income Tax, though later sales may be taxed. Donating crypto to a registered UK charity is also tax-free, and you might get tax relief.

What happens if I don’t report crypto gains or losses?

If you don’t report crypto gains or losses, HMRC can hit you with a £100 fine for late filing, plus £10 daily penalties after three months, up to £900. After six months, you face 5% of the tax owed or £300 (whichever is higher). Deliberate non-reporting is tax evasion, risking penalties up to 200% of the tax due or jail time.

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