HMRC treats crypto as a capital asset — not currency. That means every time you sell, swap, spend, or give away crypto, you may owe tax. Here’s exactly how UK crypto tax works in plain English, with no unnecessary jargon.
Disclaimer: This is general educational information, not financial or tax advice. For your specific situation, consult a qualified accountant familiar with crypto taxation.
The Two Taxes You Need to Know
1. Capital Gains Tax (CGT)
CGT applies when you dispose of crypto — meaning sell it, swap it for another crypto, spend it, or give it away (except to a spouse). You pay tax on the gain: the difference between what you paid for it (cost basis) and what you received.
CGT rates for 2025/26:
- Basic rate taxpayers: 18% on gains
- Higher/additional rate taxpayers: 24% on gains
- Annual CGT allowance: £3,000 (gains below this are tax-free)
2. Income Tax
Income tax applies when you receive crypto as income — mining rewards, staking rewards, airdrops (in most cases), and payment for goods or services. It’s taxed at your marginal income tax rate (20%, 40%, or 45%) on the GBP value at the time you receive it.
What Triggers a Taxable Event?
| Action | Tax Type | Taxable? |
|---|---|---|
| Sell crypto for GBP | CGT | Yes |
| Swap crypto for another crypto | CGT | Yes |
| Spend crypto on goods/services | CGT | Yes |
| Gift crypto (not to spouse) | CGT | Yes |
| Transfer between your own wallets | None | No |
| Buy crypto with GBP | None | No |
| Receive staking rewards | Income Tax | Yes |
| Mining rewards | Income Tax | Yes |
| Airdrop received | Income Tax (usually) | Yes |
| Transfer to spouse | None | No |
How to Calculate Your Gain
Your gain = disposal proceeds − cost basis (what you paid, including fees).
Example: You bought 0.1 BTC for £3,000 (including fees). You later sold it for £5,500. Your gain is £2,500. If this is your only gain this year, it’s under the £3,000 annual allowance — no tax owed.
HMRC uses a pooling method (Section 104 pool) for calculating cost basis: all purchases of the same asset are pooled together and averaged. There’s also a 30-day rule: if you sell and rebuy the same crypto within 30 days, the new purchase price is used as the cost basis for the sale (to prevent bed-and-breakfasting to reset gains).
Reporting to HMRC
You must report crypto gains via Self Assessment if:
- Your total gains exceed the £3,000 annual allowance, OR
- Your total disposals exceed £50,000 (even if you made no profit)
The Self Assessment deadline is 31 January each year for the previous tax year (ending 5 April). Miss it and you’ll face penalties and interest.
Record Keeping — The Part Most People Skip
HMRC requires you to keep records of every transaction: date, amount, GBP value at time of transaction, and fees paid. For active traders this can mean thousands of transactions.
Tools that help:
- Koinly — connects to exchanges and wallets, generates HMRC-compatible tax reports
- CoinTracker — similar functionality, UK tax support
- TaxBit — designed for high-volume traders
Start tracking from day one. Reconstructing years of transactions retrospectively is a nightmare and often impossible for DeFi activity.
Reducing Your Tax Bill Legally
- Use your annual CGT allowance: £3,000 per year of gains is tax-free. Plan disposals across tax years to maximise this.
- Transfer to spouse: Moving crypto to a spouse or civil partner is tax-free and doubles your allowance on disposal.
- Offset losses: Losses from crypto disposals can be offset against gains to reduce your taxable amount. Register losses with HMRC even if you don’t owe tax.
- Bed and ISA: Sell crypto, crystallise the gain (using your allowance), and reinvest proceeds into an ISA where future gains are tax-free — but you’ll pay CGT on the initial sale.
This is general information only — not tax advice. Always consult a qualified accountant for your specific circumstances. Follow @tsncrypto for daily crypto signals and guides.