Cryptocurrencies like Bitcoin and Ethereum have been gaining the attention of investors in recent years. While it's important to note that these digital assets are relatively new, and regulations are still being developed, HMRC have confirmed that they are taxable.

In the UK, whether you need to pay taxes on your cryptocurrency earnings depends on how you acquire them and the amount of profit you make. Your total income during the tax year will determine the rate of tax you will pay. In this guide, we've put together some essential information on cryptocurrency taxation in the UK. Let's get started with the question on everyone's mind!

In the UK, there isn't a specific tax solely for cryptocurrencies; however, cryptocurrencies are recognised as a type of property by HMRC. Individuals participating in crypto are caught by existing tax laws and may need to consider Capital Gains Tax or Income Tax implications from their crypto activities.

Capital Gains Tax (CGT)

CGT typically applies to individuals who buy and sell crypto assets as investments. When your net capital gains (including those outside of crypto) exceed the CGT Annual Exempt Amount (also known as the capital gains allowance) for the tax year, you're liable to pay CGT as an investor.

Income Tax (IT)

On the other hand, rewards from crypto asset activities such as mining and staking are usually treated as taxable income. This income is subject to taxation at your regular Income Tax rate.

The amount of tax you owe on your crypto transactions depends on various factors, including the type of transaction and the tax that applies.

When is there a Capital Gains Tax Disposal of my cryptocurrency?

Every time you dispose of a crypto asset, you are creating a taxable event in the eyes of HMRC. Disposals subject to Capital Gains Tax include:

• Selling crypto for fiat currency (like GBP)
• Trading or swapping one crypto for another crypto
• Gifting crypto (excluding to a spouse or civil partner)
• Spending crypto on goods or services

Some DeFi transactions may also be subject to Capital Gains Tax when a change in beneficial ownership takes place. For more detailed guidance take a look at Recap's DeFi Tax Guide.

How much tax do you need to pay on Crypto Capital Gains?

When your total capital gains (from crypto and other property like stocks and shares) exceed the capital gains allowance, you will pay tax of 10%,18%, 20% or 24% depending on your total income and time of disposal in the tax year. If your Basic Rate band is not fully used up with income, the unused amount can be used against capital gains for the 10% or 18% CGT rate.

UK CGT Annual Exempt Amount (Capital gains allowance)

UK Capital Gains Tax Rate

*Rates changed partway through the 2023/24 tax year on 30/10/2024 to 18% and 24%

How to calculate Capital Gains from crypto?

To calculate the capital gain or loss when you dispose of a crypto asset, you'll need to know:

• The matched cost basis of your crypto asset: In simple terms, this is the cost of your crypto asset when you acquired it, plus any transaction fees. However, HMRC's pooling and matching rules must be followed to ensure the correct cost is matched against the correct disposal.
• The disposal proceeds: This is the fair market value (in GBP) of the crypto asset at the time you disposed of it.

Simply subtract the matched cost basis from the disposal proceeds to work out your capital gain or loss. You'll need to follow this process for every crypto asset disposal during the tax year to calculate your net capital gains or losses.

What happens if you make a loss on crypto assets?

Any losses realised on your crypto assets will be offset against your capital gains in the same tax year. If your total losses in a tax year are higher than your capital gains, they can be rolled forward to use against capital gains in future tax years. To use them, losses must be claimed by notifying HMRC within four years of the end of the tax year in which they were realised.

When do you need to pay Income Tax on cryptocurrency?

When you receive a return or reward from crypto, it's likely Income Tax will apply. HMRC guidance suggests the following activity is likely to be taxed as income:

• Getting paid in crypto
• Mining rewards
• Staking rewards
• Liquidity pool rewards
• Lending rewards
• Some airdrops

How much tax do you need to pay on crypto income?

Most crypto income needs to be reported as "miscellaneous income" and is subject to your normal Income Tax rate, based on the sterling value when received, with any allowable expenses deducted.

Financial trading in crypto assets

In very rare circumstances, some individuals are classed as "financial traders" for their crypto asset activity. When this is the case, instead of Capital Gains and miscellaneous income tax, profits are treated as self-employed business profits, subject to Income Tax and National Insurance.

Trading allowance

An annual trading allowance of £1,000 applies to both miscellaneous and trading income. If your total trading and miscellaneous income for a tax year is less than £1,000 and you have no other self-employment, there is no tax to pay on this income. If your total income from these sources is above £1,000, you can choose to deduct the £1,000 allowance from your total income instead of itemising actual expenses. HMRC has announced plans to increase the reporting threshold for trading income to £3,000, though this is not expected to take effect until the end of the current parliament (anticipated around 2029).

Employment income

If you earn crypto income from employment (either from an employer or through self-employment), it is subject to Income Tax and National Insurance based on the sterling equivalent at the date of receipt. When receiving crypto income from an employer, the way tax and NI are collected depends on where they are based and the tokens received, so you should discuss this with them.

UK Income Tax Rates 2024/25 and 2025/26

* The Personal Allowance goes down by £1 for every £2 that your adjusted net income is above £100,000.

Are any crypto transactions exempt from tax in the UK?

Yes there are some transactions that are not subject to tax including:

• Buying crypto with fiat currency like GBP
• Holding your cryptocurrency
• Gifting crypto to your spouse or civil partner
• Gifting to a qualifying charity
• Transferring your own crypto between your own accounts and wallets

Upcoming changes: The Crypto-Asset Reporting Framework (CARF)

A major change is on the horizon for UK crypto investors. Starting from 1 January 2026, UK-based crypto-asset service providers (like exchanges) will be required to collect and report user transaction data directly to HMRC. This new rule aligns the UK with the OECD's Crypto-Asset Reporting Framework (CARF), designed to increase tax transparency.

Exchanges will have to report user details (name, address, tax identification number) and transaction information (value, asset type, transaction type). The first reports are due by 31 May 2027, covering the 2026 calendar year. This means HMRC will have much greater visibility into crypto activities, making accurate reporting more important than ever.

How to file your crypto taxes in the UK

In the UK, reporting crypto taxes is part of the annual Self Assessment process. The UK tax year runs from 6th April to 5th April. For the 2024/25 tax year (6 April 2024 to 5 April 2025), the key deadlines are:

• 5 October 2025: Register for Self Assessment if you haven't filed before.
• 31 October 2025: Deadline for filing a paper tax return.
• 31 January 2026: Deadline for filing your online tax return and paying the tax you owe.

Capital gains and losses from crypto activities should be combined with gains and losses from other sources and reported on the Capital Gains Summary (SA108) supplementary pages.

Miscellaneous income from crypto should be reported as 'Other taxable income' in Box 17 of the main SA100 tax return form. Any allowable expenses, including the trading allowance if applicable, can be reported in Box 18.

How to prepare for UK tax season

Calculating your crypto taxes can be daunting, especially for first-time filers, so here are some tips:

1. Get on top of record-keeping: You'll need records of all your crypto activity, including historical transactions, to ensure your tax calculations are accurate and you don't end up under- or over-paying.
2. Use a suitable crypto tax calculator: Calculator tools like Recap make calculating tax on your crypto simple and are especially useful when you have a lot of transactions. Simply connect your accounts or add CSV data, and the software applies fiat valuations and the appropriate tax treatment to generate your crypto tax report.
3. Consult a tax professional: Crypto tax is confusing, even more so if you're into DeFi, NFTs, or have a complex trading history, so getting specialist crypto tax advice from an accountant is invaluable. As well as helping you navigate filing your tax return, many will also be able to help you with tax strategies to lower your tax bill.
4. Stay updated on the latest guidance: Crypto is evolving quickly and so is regulation. Ensure you know how your crypto activity is taxed by staying informed with resources like Recap's UK crypto tax guide.

The information provided in this article is for general informational purposes only and should not be construed as financial or tax advice. We recommend consulting with a qualified tax advisor or financial professional who can provide personalised advice tailored to your specific circumstances.

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