Crypto Tax UK: Expert Guide 2025

Learn everything you need to know about crypto tax in the UK, including updated 2025 HMRC crypto tax rules, tax rates, how to reduce your bill, crypto capital gains tax, crypto income tax, and more in our 2025 crypto tax UK guide. 🇬🇧

Do you have to pay tax on crypto in the UK?

Yes. HMRC guidance is clear that profits from crypto may be subject to Capital Gains Tax or Income Tax, depending on the specific transaction.

How much tax do you pay on crypto in the UK?

You'll pay between 18% to 24% tax on any capital gains from crypto that are over the £3,000 tax-free allowance. Transactions prior to the Autumn Budget changes on October 30, 2024, are subject to different rates (10% - 20%). For additional income from crypto over the £12,570 personal allowance, you'll pay between 20% to 45% in tax.

The exact amount you'll pay will depend on the transaction you've made, the tax that applies, and the Income Tax band you fall into.

Find out what you owe with a crypto tax calculator.

Can HMRC track crypto?

Yes, HMRC can track cryptocurrency. It has:

• A data-sharing program with UK exchanges

• Crypto transaction data from as far back as 2014

• KYC information from crypto exchanges

Recent actions from HMRC include a press release urging crypto holders to disclose unpaid taxes on crypto voluntarily, alongside a new service that investors can use to declare any unpaid tax on crypto assets. As well as this, HMRC regularly sends out letters to investors whom it believes have failed to report crypto.

From 2026, as part of the new OECD CARF (Crypto Asset Regulatory Framework) regulations, all crypto exchanges operating in the UK will be required to collect and share customer data with HMRC. Exchanges must start collecting this data in January 2026 and report data from the 2026 calendar year by May 2027 at the latest, or face up to £300 in fines per user. Information collected includes:

• Full name

• Address

• Country of residence

• Wallet address

• Crypto transactions, including transfers, disposals, gross proceeds, and fair market values of assets

How is crypto taxed in the UK?

There is no specific Bitcoin tax or cryptocurrency tax in the UK. Instead, your crypto will either be subject to Capital Gains Tax or Income Tax.

The crypto tax you'll pay depends on the specific transactions you're making with your crypto. If you have capital gains, you'll pay Capital Gains Tax. If you have additional income, you'll pay Income Tax.

Crypto Capital Gains Tax UK

HMRC sees crypto as a capital asset. When you dispose of a capital asset, you'll pay Capital Gains Tax. Disposals of crypto include:

• Selling crypto for GBP or another fiat currency

• Trading crypto for crypto, including stablecoins and NFTs

• Spending crypto on goods and services

• Gifting crypto (unless it's to your spouse or civil partner)

Anytime you sell, trade, spend, or gift crypto in the UK and make a profit, you'll pay Capital Gains Tax as a result.

As well as this, there are some DeFi transactions, such as liquidity pool transactions, that may be subject to Income Tax or Capital Gains Tax, depending on the "nature of the transaction" and whether that transaction has the nature of capital or the nature of income. HMRC currently has guidance under review.

Capital Gains Tax free allowance

Each taxpayer receives a £3,000 Capital Gains Tax Allowance each financial year. You'll only pay tax on any capital gains over this amount.

Previously, this allowance was much higher, at £12,300 for 2022-2023 and £6,000 for 2023-2024. This change was part of the former government's budget cuts.

Let's look at how much Capital Gains Tax you'll pay on your crypto.

Crypto Capital Gains Tax rates UK

In the UK, the amount of tax you pay depends on how much you earn and when you disposed of your crypto. This is due to changes from the Autumn Budget in 2024. You'll pay between 10% to 24% tax depending on the date of your transaction and the tax band you fall into:

Please note that other investments subject to Capital Gains Tax, like residential properties or carried interest, may be subject to higher tax rates.

Crypto capital losses

If you have a loss from crypto, it's good news for your tax bill. You can offset losses against your gains to reduce your net gain to the £3,000 tax-free allowance to avoid paying any Capital Gains Tax.

You can also carry losses forward indefinitely to offset in the future, provided you register them on your self-assessment tax return.

How to carry crypto losses forward

To carry forward capital losses with HMRC, you need to report them on your self-assessment tax return. This applies even if your gains are low and you usually don't file a return. It's best to register losses in the year they occur, but HMRC gives you up to four years. If you don't file a return and want to avoid extra fees, you can simply write to HMRC to register your losses.

After a four-year period, you'll no longer be able to register your losses and utilise them to offset future gains.

How to calculate crypto gains and losses

To calculate tax on crypto gains, you need to start by figuring out your cost basis.

Your cost basis is how much it cost you to buy your crypto, plus any transaction fees. If you acquired your crypto by other means, like mining or staking rewards, you'll take the fair market value of the crypto on the day you received it in GBP as your cost basis instead.

Once you know your cost basis, it's easy to figure out your capital gain or loss. A capital gain or loss is the difference in value from when you acquired the asset to when you disposed of it by selling it, swapping it, spending it, or gifting it. So subtract your cost basis from the price you sold the asset for. If you spent, swapped, or gifted your asset, subtract your cost basis from the fair market value of the asset on the day you disposed of it.

If you have a profit, then you have a capital gain and you'll pay Capital Gains Tax on that gain. If you have a loss, you can offset this against your gains to reduce your tax bill.

HMRC crypto cost basis method

Investors often trade multiple assets, not just one, involving potentially hundreds of transactions yearly. A cost basis method dictates how you identify the cost basis for multiple assets of the same kind.

In the UK, HMRC specifies 'share pooling' as the only allowable cost basis method for crypto assets, which includes rules to prevent artificial losses from wash sales. Work through each rule in turn to figure out which method you should use to identify your cost basis:

1. Same-Day Rule: If you buy and sell coins on the same day, you need to use the cost basis on this day to calculate your gains/losses. If you’re selling more than you bought on that day, move on to the next rule.

2. Bed and Breakfasting Rule: If you sell and then repurchase the same coins/tokens within 30 days, you’ll use the cost basis of coins/tokens you bought within this month to calculate your gains/losses. If you’re selling more than you bought within this month, move on to the final rule.

3. Section 104 Rule: If the above two rules don’t apply to any of your crypto transactions, you need to use this cost basis method when calculating your crypto taxes. This works like the ACB method in that you calculate an average cost basis for a pool of assets by adding up the total amount paid for all assets and dividing it by the total amount of coins/tokens held.

Check out our article on calculating tax with share pooling for examples of how this works. These rules exist to prevent crypto investors from tax loss harvesting.

Income Tax on crypto UK

As well as capital gains, there are instances where crypto transactions may result in additional income and attract Income Tax. According to HMRC guidance, this includes:

• Getting paid in crypto (known as 'money's worth', and is subject to National Insurance too)

• Staking rewards

• Mining rewards

• Airdrops - in some instances

Other transactions that HMRC has yet to release guidance on, but that may constitute income, include:

• Referral rewards

• Learn to earn rewards

• Play to earn rewards

• Other rewards from engaging in a specific activity

Income Tax on DeFi

There are also a number of DeFi transactions that may attract Income Tax, depending on the nature of the transaction.

In general, Income Tax will only apply to 'returns' from activities, so rewards from staking, yield farming, lending, and more could be considered income and subject to Income Tax. HMRC says it's likely to be income if:

• The return to be received has been agreed upon, as opposed to speculative and unknown

• If the return is paid by the borrower/DeFi platform

• If the return is paid periodically throughout the period of lending/staking

In other words, if you're earning new coins or tokens through a given DeFi protocol, Income Tax may apply.

Learn more in our UK DeFi Tax guide.

Income Tax rates

You'll pay the same amount of Income Tax on additional income from crypto as you would on your ordinary income. Income Tax bands in the UK are as follows:

The UK uses a progressive income tax banding, so you won't pay the same flat rate of Income Tax on all your earnings. Instead, you'll pay more tax the more you earn.

It's important to note, taxpayers earning more than £125,140 a year do not receive the £12,570 personal allowance, and those earning more than £100,000 a year receive a reduced personal allowance.

Scottish taxpayers have slightly different Income Tax Bands. Read more about Income Tax in Scotland or read our crypto tax rate UK guide.

How to calculate crypto income

The value of your crypto income is the fair market value in GBP of the coins or tokens on the day you received them.

This is straightforward for small, occasional earnings, but much more time-intensive for regular small incomes from activities like mining or staking. Reviewing an entire year's worth of transactions to find each one's fair market value is a lengthy task, but thankfully, Koinly automates this process for you.

Is any crypto tax free?

Yes. Crypto transactions that are tax free in the UK, include:

• Buying crypto with GBP

• HODLing crypto

• Transferring crypto between your own wallets

• Donating crypto to charity

• Gifting crypto to your spouse

Lost or stolen crypto

HMRC has clear guidance on lost and stolen crypto - and it's not all good news. HMRC does not consider theft or loss as a capital loss. But you may be able to make a negligible value claim in some specific circumstances and later claim a capital loss.

A new bill has recently been introduced in Parliament to clarify crypto's legal status as personal property. This will give investors greater protection if assets are interfered with, so claiming a loss in the future may be easier.

Find out more in our HMRC lost crypto tax guide.

Crypto tax breaks

UK crypto investors can pay less tax on crypto by making the most of tax breaks:

1. £12,570 Personal Income Tax Allowance: Your first £12,570 of income in the UK is tax free. Please note that you do not get a Personal Income Tax Allowance if you earn more than £125,140 a year.

2. Trading and Property Allowance: £1,000 of income from trading or property is tax free thanks to the Trading and Property Allowance. If you've got income from both, you can get £2,000 tax free.

3. Capital Gains Tax Free Allowance: Each taxpayer receives a £3,000 Capital Gains Tax tax free allowance for the financial year. Only gains over this threshold are taxable, and you can offset losses against gains to bring you down to this threshold.

When do you need to report your crypto taxes to HMRC?

The UK financial year runs from the 6th of April to the 5th of April the next year.

So financial year you'll be reporting on in 2026 is from the 6th of April 2024 to the 5th of April 2025. You need to report your taxes for this financial year in your Self Assessment Tax Return. The deadline to report is by the 31st of January 2026 for online returns and the 31st of October 2025 for paper forms.

How to report crypto taxes to HMRC

You file your crypto taxes as part of your Self Assessment Tax Return. You can see our complete guide on reporting crypto to HMRC, but in summary:

• Report crypto capital gains and losses on: SA100 and Capital Gains Summary SA108.

• Report crypto income on: Box 17 of your Self Assessment Tax Return (SA100).

You can do all of this online through the Government Gateway service, or you can file your self-assessment tax return with paper forms by post (but the deadline is earlier).

How to pay tax on cryptocurrency to HMRC

Once you've filed your Self Assessment Tax Return with HMRC, reporting your crypto gains and income, HMRC will let you know how much tax you owe on your crypto. You'll need to pay cryptocurrency taxes by the 31st of January.

This is the same deadline as filing your taxes, so we recommend doing this before this date so you're not stuck in the lurch with a large tax bill that needs to be paid straight away!

Can I avoid paying tax on crypto?

No, but there are ways to strategically and legally reduce your crypto taxes. However, you'll need to make your move before the end of the financial year. See our guide on how to pay less crypto tax legally by optimising your tax position before the 5th of April 2026.

With the basics out of the way, let's dive into the tax implications of different transactions.

Do you pay tax when you buy crypto in the UK?

No. Buying crypto with fiat currencies is not a taxable event.

Buying crypto with GBP

You're not taxed when you buy crypto with fiat currency, like GBP, in the UK.

However, it's important you keep records of your crypto transactions so you can keep a detailed account of your cost basis. This makes sure you can accurately calculate subsequent gains or losses, so you don't over- or underpay in tax.

Buying and HODLing crypto

Waiting for the moon? You pay no tax on crypto you HODL.

Again, do make sure to keep records of how much it cost you to acquire your crypto so you can calculate subsequent capital gains and losses accurately.

For those long-term HODLers, it's wise to use a platform (like Koinly) that tracks and stores trading information for long periods, as exchanges often only keep information for a matter of months.

Is trading crypto for crypto taxable?

Yes. Regardless of the type of asset, your crypto trade is taxable according to HMRC guidance.

Trading crypto with crypto

Trading one crypto for another is a taxable event. So if you trade BTC for ETH, you'll pay Capital Gains Tax on any profit from your transaction.

HMRC views a crypto trade as two separate transactions. Trading your asset is a disposal, just like selling or spending it. The asset you traded your previous crypto for is an acquisition, and you'll need to track the cost basis.

To calculate your capital gain, you'd use the cost base of the crypto you disposed of and subtract it from the fair market value for that asset on the day you traded it for another crypto.

Trading crypto for stablecoins

Stablecoins are cryptocurrencies that are pegged to a reserve currency, most often a fiat currency. For example, the cryptocurrency USDT is tethered to the US dollar. This allows for reduced price volatility.

But from a tax perspective, it's all the same. Your stablecoin is a crypto asset, and any disposal is taxed as such. This includes trading a crypto asset like Bitcoin for stablecoins. Any profits are subject to Capital Gains Tax.

Do you pay tax when you sell cryptocurrency in the UK?

Yes, you'll pay tax whenever you sell cryptocurrency in the UK. The amount you pay will vary depending on your income.

Selling crypto for GBP

Selling crypto for fiat currency like GBP is a disposal and subject to Capital Gains Tax.

You'll pay up to 24% in tax on the profits from your sale, depending on your total annual income.

Do you pay tax when transferring crypto?

No! You shouldn't pay tax on your crypto when you're transferring it between the wallets or exchanges you use. This said, transfer fees may be taxable disposals.

Moving crypto between wallets

Transferring crypto between your own crypto wallets or exchanges is tax free. It isn't viewed as a disposal by HMRC, so you won't pay Capital Gains Tax on these transactions.

Having said all this, it's still really important you keep good records of these transfers because when it comes to transfer fees, things get a little more complicated.

Transfer fees

When you transfer your crypto, your wallet provider or crypto exchange will often charge you a transfer fee to do so.

In most instances, you won't be paying this fee in fiat currency; you'll be paying it in cryptocurrency, and spending crypto is a taxable event. It's seen as a disposal of an asset, and you'll need to pay Capital Gains Tax on any profit.

HMRC has pretty specific guidance on what is an allowable cost in crypto. These are costs you can add to your cost basis, and transfer fees are not included in this list. So we can safely assume transfer fees cannot be added to your cost basis, and they would be viewed as disposals in some instances.

How are airdrops and forks taxed in the UK?

HMRC has clear guidance on how both airdrops and forks are taxed in the UK. Let's break it down.

Soft and hard forks

HMRC has clear guidance on how they tax crypto forks.

For soft forks, you'll receive no new assets, so no taxable event occurs. Your original cost basis will be carried over to the new asset with no taxable event taking place.

For hard forks, where you receive a new coin as a result of a fork, you still won't pay any Income Tax on receipt of these coins. However, your cost basis from any coins received from a hard fork is derived from your existing tokens from the previous blockchain, not the fair market value of the coin on the day you received it.

This matters because when you later spend, sell, swap, or gift coins you received from a hard fork, they will still be subject to Capital Gains Tax at this point, just like any other crypto.

Airdrops

In most instances, HMRC says you'll pay Income Tax on airdrops upon receipt. You can calculate how much income you have by identifying the fair market value of the tokens on the day you received them in GBP.

HMRC considers airdrops income whenever you've done something to earn them. This could include actions as simple as sharing a social media post or being rewarded due to your previous trades on a given blockchain. So in many instances, your airdrops are going to be considered income and subject to Income Tax.

However, airdrops are not considered income if you receive them without providing some kind of service or action in return.

If you later dispose of your airdropped tokens, these would be taxed like any other disposal. For airdrops that are not considered income, you'll use a zero cost basis, meaning if you later sell or trade them, your entire proceeds would be a taxable gain.

Crypto gifts and donations tax

Gifting crypto in the UK is taxed. It's seen as a kind of disposal and therefore subject to Capital Gains Tax. However, you can gift crypto to your spouse or civil partner tax free, and donations are tax deductible.

Gifting crypto to friends or family

If you give cryptocurrency as a gift to someone other than your spouse or civil partner, you will have to figure out the market value (in pounds sterling) of the crypto on the date that it was given away as a gift. This will be considered as sales proceeds for Capital Gains Tax purposes.

Importantly, if Income Tax has already been charged on the value of the tokens that are gifted, section 37 of the Capital Gains Tax Act 1992 will apply. This basically means that the "sales proceeds" will be reduced by the amount that has already been subject to Income Tax, and then be subjected to CGT.

Gifting crypto to your spouse or civil partner

You can gift crypto to your spouse or civil partner tax free in the UK. There is no limit on how much you can gift.

This might not seem like a big deal, but it is. This legal tax loophole can let you take advantage of each individual Capital Gains Tax allowance in your household, as well as potentially a lower Income Tax band, all reducing your overall Capital Gains Tax bill.

Donating crypto to a registered charity

Donating crypto to a registered charity is tax free in the UK.

If an individual donates crypto to charity, they are entitled to Income Tax relief on the donated amount. They can also get an exemption from Capital Gains Tax, although there are two exceptions:

• In case the individual sells the crypto assets to the charity at a cost that is more than the acquisition cost, they will have to pay CGT on the difference between the selling price (instead of the market price) and the acquisition cost.

• Tainted donations are not tax deductible. This refers to a situation where an individual makes arrangements with a charity to get some form of financial advantage or benefit.

Crypto mining tax UK

Mining cryptocurrency in the UK can either be considered a hobby or a full-fledged business. This will depend on several factors such as:

• Degree of activity

• Organisation

• Risk

• Commerciality

Mining crypto as a hobby

If your mining activity is classified as a hobby, then any income from mining has to be declared separately under the heading of "miscellaneous income" on your tax return. The income in this case will be the fair market value of your mining rewards at the time you receive them in GBP.

Appropriate expenses can be deducted from this income before adding it to the taxable income, which should be found in HMRC's latest guidance.

Keep in mind that if you later dispose of this crypto, that will be subject to Capital Gains Tax, the same as any other disposal.

Mining as a business

If mining is classified as a business based on the criteria mentioned above, then the mining income will be added to trading profits and be subject to Income Tax. Similarly, fees or rewards received from any mining/staking activity will also be added to taxable income. Appropriate expenses would be deductible, of course.

While disposing of such cryptocurrency, any gain in value from the time of acquisition will be added to the trading profits. You will also have to pay National Insurance contributions for this transaction.

Crypto derivatives and margin trading tax

HMRC doesn't have specific guidance on transactions such as margin trading, crypto futures, and other CFDs. However, there is general guidance on the tax implications of these kinds of transactions for traditional markets and assets. How you're taxed depends on whether you're:

• Speculative (like gambling): No tax applied.

• Self-employed (same rules as normal business activity): Business Tax applied.

• Private investor (not doing this full-time): Capital Gains Tax on profits from closed positions, excluding spread betting.

The vast majority of crypto investors will be considered private investors. It all depends on the scale at which you're doing it, but if you're working a regular job alongside crypto investing, chances are you'll be considered a private investor.

For those interested in optimizing their day trading experience, we've got a guide to the best crypto exchanges for day trading to help you select a great platform for your needs as a day trader.

Let's look at how each different trading product is taxed.

Margin trading and other CFDs

If you're seen to be trading as a private investor, you'll pay Capital Gains Tax on profits from margin trades and other CFDs. So when you open a position, you won't pay tax. It's only when you close your position that you'll realise a capital gain or loss and pay Capital Gains Tax on any profits.

In the instance of liquidation, when your collateral is sold, this is a disposal from a tax perspective and therefore should be reported to HMRC.

Derivatives, futures, and spread betting

Spread betting in the UK is controversial, to say the least. It's the reason thousands of crypto exchanges have been banned from operating in the UK as they won't remove derivative products like Bitcoin futures or agree to be regulated by the FCA.

Spread betting in the UK is considered gambling-like speculation, which means it isn't subject to Capital Gains Tax. For private investors in the UK, this means you won't pay Capital Gains Tax on spread bets.

This is, however, a bit of a legal grey area. The FCA has banned crypto derivatives products without written consent from the FCA. So you should speak to a crypto tax advisor for more bespoke advice on these investments.

DeFi crypto taxes UK

HMRC released guidance on DeFi transactions, but it remains under review.

It all comes down to the 'nature of the transaction' and whether it has the nature of capital or the nature of revenue. The former would be subject to Capital Gains Tax, while the latter would be subject to Income Tax. In other words, it all comes down to how your specific DeFi protocol works.

DeFi transactions that are likely to be viewed as disposals and subject to Capital Gains Tax include liquidity pool transactions, where you trade one token for another. In some instances, the rewards you receive from DeFi protocols (if you receive that reward in one large sum) may also be subject to Capital Gains Tax.

Meanwhile, returns may be seen as income in other instances. This will generally apply to DeFi protocols where you receive new tokens as a result of your investment activities.

HMRC has announced a further consultation on DeFi and staking. Specifically, the tax office is considering disregarding Capital Gains Tax implications from any disposal of beneficial ownership that may occur through lending or staking. If this outcome occurs, it would make the UK particularly appealing for crypto investors from a tax perspective, as few other countries have taken this view.

Earning from DeFi protocols

Anytime you're seen to be 'earning' from DeFi, where you receive new coins or tokens, it's likely that HMRC will view this as additional income, and you'll pay Income Tax based on the fair market value of the asset in GBP on the day you received it.

Trading tokens on DeFi protocols

Anytime you sell or trade a coin or token on a DeFi protocol, this is likely to be viewed as a disposal by HMRC, making it subject to Capital Gains Tax. You'll pay tax on any profits as a result of a disposal.

This includes transactions like trading tokens on dexes, as well as liquidity pool transactions where you deposit collateral and receive another token in return.

Do you pay tax when spending crypto?

Thinking of putting your crypto towards a console? Bad news, you might need to pay Capital Gains Tax.

Spending crypto on goods or services

Spending your crypto is subject to Capital Gains Tax because you're disposing of your asset.

You'll need to calculate any capital gain or loss by subtracting your cost basis from the fair market value of your crypto on the day you spent it.

If the price of your asset has increased since you acquired it, you'll need to pay Capital Gains Tax on that profit. If the price of your asset has decreased since you acquired it, you have a capital loss you can offset against gains.

How to calculate your crypto taxes

Calculating your crypto taxes so you can report them to HMRC, especially if you trade at volume, is time-consuming. You can do it all manually, or you can use a crypto tax calculator like Koinly to save you hours.

If you want to calculate your crypto taxes manually, follow these steps:

1. Identify all your taxable crypto transactions for the entire financial year you're reporting on.

2. Identify which transactions are subject to Income Tax and which transactions are subject to Capital Gains Tax.

3. Identify the cost base for each transaction using the Share Pooling Cost Basis Method.

4. Calculate your subsequent capital gains and losses, income, and expenses.

5. Subtract your net capital loss from your net capital gain.

If your net capital gain is less than the £3,000 Capital Gains Tax Allowance, you'll only need to report your crypto taxes to HMRC if:

• Your gross proceeds of the disposals exceed £49,200 (even if your gains are lower than the allowance).

• You’re registered for Self Assessment.

If your net capital gain is more than your Capital Gains Tax Allowance, you'll need to report this to HMRC. It's a lot of work, but you can save hours with Koinly.

How to calculate your crypto taxes with Koinly

Don't get stuck in the busy work. Don't get it wrong. Don't rely on your accountant to know where to look. Use Koinly to generate your HMRC crypto tax report. Here's how easy it is:

1. Sign up for a FREE Koinly account. It only takes a minute!

2. Select your base country and currency. In this instance, the United Kingdom and Great British Pounds.

3. Select your accounting method. Koinly supports the UK Share Pooling Cost Basis Method. This is the only cost basis method allowed in the UK, so you shouldn't change it.

4. Connect Koinly to your wallets, exchanges, or blockchains. Koinly integrates with more than 900+ crypto exchanges, wallets, and blockchains. (See all) If you can't find yours, let us know - we're always adding more.

5. Let Koinly crunch the numbers. Koinly will calculate your cost basis for each crypto asset and calculate each capital gain or loss from your disposals, as well as your crypto income and expenses.

6. Ta-da! Your data is collected, and your full tax report is generated! Head to the tax reports page in Koinly and check out your tax summary. This includes your net capital gains, other gains, income, costs, expenses, and any gifts, donations, or lost crypto.

7. To download your crypto tax report, upgrade to a paid plan from £39 per year. Download what you need, when you need it. For UK investors, you can download your HMRC Capital Gains Summary in seconds.

8. Send your report to your accountant, or complete your Self Assessment Tax Return yourself. Use the generated file to complete your Self Assessment Tax Return or send it over to your accountant. Job done.

What kind of records will HMRC ask for?

As far as crypto record keeping is concerned, HMRC correctly states that many exchanges do not keep detailed information about crypto transactions and the onus of maintaining these transactions accurately rests with the taxpayer. These details include:

• The type of crypto asset

• Date of the transaction

• Whether the crypto assets were bought or sold

• The number of units involved

• The value of the transaction in pounds sterling

• The cumulative total of the investment units held

• Bank statements and wallet addresses, as these might be needed for an inquiry or review

You should ensure you download reports regularly from your exchanges, as they can lose your data or just delete it permanently after a certain period of time. Again, using tax software like Koinly can help you maintain excellent records.

What happens if I don't report my crypto to HMRC?

If you’re wondering how far back HMRC will go in an effort to discover unreported gains, it all depends on whether you’ve taken reasonable care in your taxes or deliberately misled HMRC:

• If you’ve taken reasonable care in reporting your crypto taxes but did not pay enough, you’ll need to disclose and pay any taxes due for the previous four years

• If you did not take enough care in disclosing your crypto gains, you must pay HMRC what you owe for a maximum of six years

• If you've deliberately misled HMRC about crypto gains or income and deliberately not paid enough tax, you’ll have to declare and pay any tax due for a maximum of 20 years

Cryptocurrency trading as a business

If you are carrying on a business that involves cryptocurrency transactions, then the rules are more complex.

You may be liable to pay a number of different taxes like CGT, Income Tax, Corporation Tax, Stamp Duties, and even VAT depending on the type of transaction.

Note that HMRC may decide to treat you as a business even if you are an individual if your level of activity is comparable to a business. So how does HMRC decide whether you're holding crypto as an investment or whether you qualify as a crypto trader? Here's what HMRC has to say about it:

"Only in exceptional circumstances would HMRC expect individuals to buy and sell crypto assets with such frequency, level of organisation, and sophistication that the activity amounts to a financial trade in itself. If it is considered to be trading then Income Tax will take priority over Capital Gains Tax and will apply to profits (or losses) as it would be considered as a business"

In this case, a trade in crypto assets would be similar to trading in shares, securities, etc. This means that crypto traders can refer to the Business Income manual (BIM56800) for more information on the relevant approach.