Tax

Crypto Tax UK 2025 — What You Owe HMRC on Bitcoin and Cryptocurrency

26 May 2025 ⏱ 11 min read 🇬🇧 United Kingdom Last reviewed: May 2025

HMRC has been clear since 2018 that cryptocurrency is a capital asset, not a currency — and selling, swapping, or spending it is a taxable disposal subject to Capital Gains Tax. Staking rewards and DeFi income can also trigger Income Tax. With HMRC now receiving data from UK crypto exchanges and increasing enforcement, understanding your obligations has never been more important. This guide explains exactly what is taxable, how to calculate your gain, and how to report it.

How HMRC Treats Cryptocurrency

HMRC's position, set out in its Cryptoassets Manual (published 2019 and regularly updated), is that most individuals who hold cryptocurrency do so as a capital asset — not as currency and not as trading stock (unless they trade at very high frequency in a way that constitutes a trade). This means:

Buying cryptocurrency with GBP is not itself a taxable event
Selling, swapping, or spending cryptocurrency is a disposal that may trigger Capital Gains Tax
Income received in cryptocurrency (from mining, staking, airdrops, or employment) is subject to Income Tax at the time of receipt
The base cost of any cryptocurrency acquired as income is its market value at the time of receipt — this becomes the acquisition cost for CGT purposes when it is later sold

HMRC does not accept that cryptocurrency-to-cryptocurrency swaps are "like-for-like" exchanges that defer the tax event. Every time you swap one coin for another — selling Bitcoin to buy Ethereum, for example — you have disposed of the Bitcoin at its market value on the day of the swap, and acquired Ethereum at that same market value. The gain or loss on the Bitcoin disposal must be calculated and reported.

Which Transactions Are Taxable Disposals?

A disposal for CGT purposes occurs when you:

Sell cryptocurrency for GBP or another fiat currency — the most straightforward disposal
Swap one cryptocurrency for another — Bitcoin for Ethereum, for example, is a disposal of Bitcoin and an acquisition of Ethereum
Use cryptocurrency to pay for goods or services — paying for a pizza with Bitcoin is a disposal of Bitcoin at its GBP value on the day
Gift cryptocurrency to anyone other than your spouse or civil partner — gifting to a third party triggers a disposal at market value. Gifts between spouses and civil partners are exempt from CGT (though the recipient inherits the donor's acquisition cost).
Enter cryptocurrency into a DeFi liquidity pool — in many cases, contributing assets to a pool is treated as a disposal and reacquisition at market value

Transactions that are NOT disposals include: buying cryptocurrency with GBP, transferring cryptocurrency between your own wallets, and holding cryptocurrency in a wallet without transacting.

Calculate your crypto capital gains and tax liability with our Crypto Tax Calculator.

How to Calculate Your Capital Gain

The gain on a disposal is: Sale proceeds minus acquisition cost minus allowable costs. Allowable costs include: the original purchase price (in GBP), transaction fees paid on acquisition and disposal, and reasonable costs of valuation for tax purposes.

The Section 104 Pool — Averaging Your Costs

For cryptocurrencies held over time with multiple purchase dates, HMRC uses a "section 104 pool" calculation. All purchases of the same coin are pooled together and the average acquisition cost is calculated across the pool. When you sell, you deduct the average pooled cost proportionate to the amount sold.

Example: You bought 1 Bitcoin for £10,000 in 2020 and another 1 Bitcoin for £30,000 in 2021. Your pool holds 2 Bitcoin at a total cost of £40,000 — average cost £20,000 per coin. If you sell 1 Bitcoin for £50,000 in 2025, your gain is £50,000 − £20,000 = £30,000.

Same-Day and 30-Day Bed and Breakfasting Rules

To prevent "bed and breakfasting" (selling and immediately rebuying to create artificial losses), special matching rules apply:

Same-day rule: If you buy and sell the same coin on the same day, the sale is matched against the day's purchases first, not the pool.
30-day rule (FIFO within 30 days): If you sell and then repurchase within 30 days, the sale is matched against the repurchase cost (not the pool average), preventing the crystallisation of losses.

These rules can significantly affect calculated gains and losses, particularly for active traders. Crypto tax software that follows HMRC's matching rules is strongly recommended for anyone with many transactions.

The Annual CGT Allowance

Every individual has an annual CGT exempt amount — £3,000 for 2025/26. This means you can realise up to £3,000 of net capital gains per tax year without paying CGT. Gains above £3,000 are taxed at:

Taxpayer	CGT Rate on Crypto Gains
Basic rate taxpayer (where gains stay in basic rate band)	18%
Higher or additional rate taxpayer (or where gains push into higher rate)	24%

Crypto gains are added to the top of your other income when working out the applicable CGT rate. A basic rate taxpayer with salary of £45,000 and crypto gains of £15,000 would have £5,270 of gains in the basic rate band (18%) and £6,730 in the higher rate band (24%), after the £3,000 exempt amount.

Income Tax on Crypto — Mining, Staking and Airdrops

Not all crypto income is CGT — some receipts are subject to Income Tax:

Mining

If you mine cryptocurrency as a business (regularly, with a profit motive, at commercial scale), mining income is subject to Income Tax and NI as self-employment income. The market value of coins at the date they are mined is the taxable income amount. Expenses (electricity, hardware, etc.) are deductible as business expenses. Hobby mining on a very small scale may be treated as miscellaneous income rather than trading income — but HMRC's line between hobby and business is fact-specific.

Staking

HMRC's current position is that staking rewards are subject to Income Tax on receipt (at the market value of the reward at the time received), whether you are delegating proof-of-stake tokens or running a validator. The coins then have a cost equal to the value on which you paid Income Tax — reducing your CGT gain when you later sell.

Airdrops

Airdrops received in exchange for a service (such as for holding a particular token or completing a task) are subject to Income Tax. Unsolicited airdrops where nothing is provided in return are generally capital receipts with a nil acquisition cost — meaning the full sale proceeds become the gain when sold.

DeFi Lending and Yield Farming

HMRC's guidance on DeFi is evolving. In many cases, lending tokens through a protocol or adding them to a liquidity pool may constitute a disposal for CGT — followed by a reacquisition when you withdraw. Interest and returns received from lending are generally treated as miscellaneous income subject to Income Tax. HMRC published specific DeFi guidance in 2022 which should be consulted for complex DeFi strategies.

HMRC Enforcement — The Data Trail

HMRC has significantly increased its enforcement activity on cryptoassets since 2021. Key developments include:

UK crypto exchanges (including Coinbase UK, Kraken, and Binance) are required to provide HMRC with data on customers' transactions and holdings
HMRC has issued "nudge letters" to thousands of crypto holders identified through exchange data, asking them to check their tax position
Under the OECD's Cryptoasset Reporting Framework, data sharing between tax authorities internationally is expanding — offshore exchange data will increasingly be shared with HMRC

The "I didn't know I had to pay tax" defence is unlikely to be accepted by HMRC, particularly given the widespread publicity since 2018. Voluntary disclosure through HMRC's Cryptoassets Taskforce disclosure facility is likely to result in lower penalties than being discovered through investigation.

Keep records of all transactions. You are legally required to keep records sufficient to calculate your gain or income from cryptoassets. This includes transaction history from exchanges, wallet addresses, amounts, dates, and GBP values at the time of each transaction. Exchange records can be difficult to obtain retrospectively — download and keep records regularly.

Step-by-Step: Reporting Crypto to HMRC

Download your transaction history — export full transaction records from every exchange and wallet you have used. Include dates, amounts, and GBP values.
Calculate your gains — use the section 104 pool method, applying same-day and 30-day rules. Crypto tax software such as Koinly, CryptoTaxCalculator, or Accointing can automate this. Our Crypto Tax Calculator can help with basic calculations.
Identify any income receipts — separate staking rewards, mining income, and airdrop income from capital gains. These are reported differently on your tax return.
Register for Self Assessment if not already — if your total gains exceed £3,000 or your crypto income exceeds £1,000, you must file a Self Assessment return.
File your return by 31 January — report crypto gains on the Capital Gains Tax pages (SA108) and income on the relevant income pages. Pay any tax due by 31 January.
Consider voluntary disclosure for past years — if you have unreported gains from earlier years, use HMRC's Cryptoassets Taskforce disclosure service to regularise your position before HMRC contacts you.

Frequently Asked Questions

Do I have to report crypto if I made a loss?+

You do not have to report crypto losses — but you should, because capital losses can be offset against capital gains to reduce your tax bill. Losses must be reported to HMRC within four years of the end of the tax year in which they arose. You can carry losses forward to future tax years if they exceed your gains in the current year. Reporting losses to HMRC even in years with no net gain protects your ability to use those losses in future profitable years.

What if I sent crypto to the wrong address and lost it permanently?+

HMRC allows a negligible value claim where cryptocurrency has been lost in a way that makes recovery practically impossible — for example, the total and permanent loss of a private key. A successful negligible value claim allows you to treat the loss as a capital loss, potentially offsetting other gains. You must apply to HMRC and be able to demonstrate the coins are genuinely unrecoverable. Simply forgetting where you put coins does not qualify.

Is holding crypto in a cold wallet still taxable?+

Holding crypto in a cold wallet is not a taxable event. The tax event occurs on disposal — when you sell, swap, or spend the coin, regardless of where it was stored. Moving crypto between your own wallets (hot to cold, exchange to hardware wallet) is also not a disposal, provided you own both wallets. Keep records of your wallet addresses to demonstrate ownership if HMRC ever questions a transfer.

Are NFTs taxed the same way as cryptocurrency?+

Generally yes. HMRC treats NFTs as cryptoassets subject to CGT on disposal. Creating an NFT and selling it for the first time may also generate income taxable as trading income if done at commercial scale. The section 104 pool rules do not apply to NFTs because each NFT is unique — gains and losses are calculated individually for each NFT disposed of. NFT-related activity should be reported on Self Assessment in the same way as other crypto disposals.