Crypto Tax UK: Expert Guide 2025
Do you owe tax on cryptocurrency in the UK? Find out in our comprehensive 2025 UK Crypto Tax guide! Discover the ins and outs of UK crypto taxation, including DeFi, mining, and staking. Plus get expert tips on reducing your UK crypto tax bill. We've got everything you need to know about tax on cryptocurrency in the UK.
Do you have to pay tax on crypto in the UK?
Yes - for most crypto investors. UK financial institutions don't recognise crypto assets as money or currency. Tax-wise, crypto is treated similarly to shares and is taxed in the same way. That means that all cryptocurrency is taxable in the UK.
HMRC is clear that crypto may be subject to both Capital Gains Tax and Income Tax depending on the specific transaction.
How much tax do you pay on crypto in the UK?
For capital gains from crypto over the £6,000 tax free allowance for 2023-2024, you'll pay 10% or 20% tax. The new Autumn Budget also announced that Capital Gains Tax rates have been raised to 18% and 24% respectively from October 30, 2024. 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.
For the 2024-2025 financial year, the tax free allowance for capital gains has been cut from £6,000 to £3,000.
Find out what you owe with a crypto tax calculator.
Watch our ultimate UK crypto tax guide
This guide is regularly updated
Before we start - the UK crypto tax rules are in constant flux. At Koinly, we keep a very close eye on HMRC's Cryptoassets Manual and regularly update our guide to keep you informed and tax compliant.
30 October 2024: New CGT rates are in effect from October 30, 2024.
17 October 2024: HMRC confirms more nudge letters are being sent out to investors.
23 September 2024: Updated for the 2025 tax deadline & incoming regulations.
1 April 2024: Remember, you've only got until the 5th of April 2024 to make the most of the £6,000 Capital Gains Tax allowance before it halves to £3,000 in the new financial year.
9 January 2024: HMRC issues another reminder to file a self-assessment for crypto investors.
4 December 2023: HMRC urges crypto investors to disclose unpaid tax on crypto as the tax deadline approaches!
15 November 2023: HMRC 2023 tax rates updated.
15 March 2023: Coinbase shares user data with HMRC & the Spring Budget announces new crypto tax reporting requirements.
10 February 2023: Updated with new deadlines, rates, and dates!
25 November 2022: Updated for the January 2023 tax deadline & with new CGT guidance.
3 February 2022: HMRC releases new guidance on the taxation of DeFi transactions.
7 January 2022: Coinbase is contacting customers to let them know they're sharing customer information with HMRC.
6 January 2022: HMRC extends Self Assessment Tax deadline from January 31st to February 28th due to the Covid-19 pandemic.
8 December 2021: New year, new guide!
12 November 2021: HMRC 2022 tax rates updated.
20 October 2021: HMRC sends nudge letters to crypto traders.
1 March 2020: HMRC 2021 tax rates updated.
1 July 2019: Welcome to your cryptocurrency tax UK guide!
Can HMRC track crypto?
Yes - HMRC can track cryptocurrency. By tapping into information from exchanges like Crypto.com, HRMC is able to keep tabs on crypto transactions and target investors who are not meeting their tax obligations.
HMRC has a data-sharing program with all UK exchanges
HMRC has crypto transaction data from as far back as 2014
HMRC has the KYC information you provided when signing up for any UK exchange or wallet
HMRC has just issued a press release urging crypto holders to disclose unpaid taxes on crypto voluntarily. The tax office has released a new service that investors can use to declare any unpaid tax on crypto assets, stating that investors who fail to contact HMRC may be liable for additional interest and penalties. As well as this, HMRC has once again declared it will be sending out letters to investors who have failed to report crypto.
This shows an increasing focus on crypto taxes from HMRC and that HMRC is ramping up its efforts to discover unreported gains as the UK gears up to begin exchanging information with European counterparts on crypto transactions as part of CARF regulations.
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
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're seen to be making an income, you'll pay Income Tax. If you're seen to be making a capital gain, you'll pay Capital Gains Tax.
We'll look at both.
Crypto Capital Gains Tax UK
Because 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
Spending crypto on goods and services
Gifting crypto - unless it's to your spouse or civil partner
So anytime you sell, trade, spend, or gift crypto in the UK - you'll pay Capital Gains Tax as a result.
You won't pay tax on the entire proceeds when you make a disposal. You'll only pay tax on crypto gains, so whenever you've made a profit.
In addition to this, HMRC has finally released some guidance on DeFi transactions - in particular lending and staking - but it hasn't really clarified too much. The guidance now states that DeFi transactions 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. In essence, a capital transaction happens when you dispose of your crypto, regardless of whether you have the right to claim that crypto back or not, this could include:
Adding/removing your crypto in a liquidity pool - if the DeFi protocol can benefit from your liquidity.
Staking your crypto through a DeFi protocol - though the return from staking may be chargeable under Income Tax.
Capital Gains UK Tax Free Allowance
HMRC cut the Capital Gains Tax Allowance from £12,300 a year to £6,000 a year for the 2023 - 2024 financial year. This halved again for the current 2024 - 2025 financial year to £3,000.
Let's look at how much Capital Gains Tax you'll pay on your crypto.
Crypto Capital Gains Tax Rates UK
Unlike many other countries, the UK doesn't have a short-term and long-term Capital Gains Tax rate. All capital gains are taxed under the same rates. The amount of Capital Gains Tax you'll pay depends on how much you earn. In 2025, you'll pay either 10% or 20% tax on any crypto gains, depending on what band you fall under.
If you earned less than £50,270 (total income) - you'll pay 10% on crypto gains.
If you earned more than £50,270 (total income) - you'll pay 20% on crypto gains.
Tax Rate | Taxable Income |
---|---|
10% | Basic Rate Income Band (up to £50,270) |
20% | Higher Rate Income Band (up to £150,000) |
20% | Additional Rate Income Band (more than £150,000) |
Please note other investments subject to Capital Gains Tax, like residential properties or carried interest, may be subject to higher tax rates.
As part of the Autumn Budget 2024, Capital Gains Tax rates have risen from October 30, 2024. Any disposals made after this date are subject to the new higher tax rates.
Tax Rate | Taxable Income |
---|---|
18% | Basic Rate Income Band (up to £50,270) |
24% | Higher Rate Income Band (up to £150,000) |
24% | Additional Rate Income Band (more than £150,000) |
Crypto capital losses
Not all investments yield gains; some lead to capital losses, which aren't subject to Capital Gains Tax. In the UK, you can offset unlimited capital losses against gains, reducing them to the £6,000 tax-free allowance (for 2023/24), thus avoiding Capital Gains Tax. Carry forward these losses indefinitely by registering them on your self-assessment tax return.
Even if your gains are below the threshold and you don't usually file a return, it's wise to register losses to carry them forward. While HMRC allows four years to register losses, doing it in the year incurred is recommended. Alternatively, if you're not filing a self-assessment, you can notify HMRC in writing to register your losses.
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.
EXAMPLE
Oliver made a £20,000 gain selling Bitcoin this year, but last year he made a loss of £10,000, which he registered with HMRC. He has not used any of his Capital Gains Tax free allowance this year.
So Oliver can use his £10,000 loss from the previous year to offset his £20,000 gain, bringing it down to £10,000. He can then utilize his Capital Gains Tax free allowance of £6,000 (for 23-24 FY), leaving him with a taxable gain of £4,000.
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 an airdrop or fork - you'll take the fair market value of the crypto on the day you received in GBP it 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 have a capital loss and you won't pay Capital Gains Tax on your loss - but you do want to keep track of these as they can reduce your tax bill. We'll explain this in a minute - but first, let's look at an example of calculating tax on a crypto capital gain.
Example
Oscar bought 1 BTC in May 2023. The price of BTC on the day he bought it was £22,000 and he paid £100 in transaction fees. This is his cost basis (£22,100).
In May 2024, Oscar sells his BTC. The price of BTC on the day he sells it is £56,000. He needs to subtract his cost basis from his sale price to figure out his capital gain.
£56,000 - £22,100 = £33,900.
This is his capital gain and he'll pay Capital Gains Tax on this amount. To figure out how much tax he'll pay, he needs to look at his regular income to figure out which Capital Gains Tax band he falls into (10% or 20%). He can also utilize his £3,000 Capital Gains Tax free allowance for the 2024-2025 financial year.
UK cost basis method
Investors often trade multiple assets, not just one, involving potentially hundreds of transactions yearly. A cost basis method is essential here, guiding the calculation of gains and losses for identical assets. In the UK, HMRC specifies 'share pooling' as the crypto cost basis method, preventing manipulation of gains and losses through rapid buy-sell actions to distort the actual financial picture.
3 cost basis methods:
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.
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.
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
Now we've covered everything you need to know about crypto capital gains, let's look at crypto income and Income Tax.
There are cases where crypto is treated as income and thus attracts Income Tax. Cryptocurrency transactions that are classified as income are taxed at your regular Income Tax band. In some instances, you'll need to make National Insurance contributions on income from crypto as well.
In the UK, crypto is taxed as Income when it comes from:
Getting paid in crypto - known as 'money's worth' and is subject to National Insurance too
Airdrops - in most instances
Income from DeFi
HMRC has finally released guidance on DeFi transactions - in particular lending and staking. The guidance now states that DeFi transactions 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. If your DeFi activities have the 'nature of income', they'll be subject to Income Tax.
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 considered 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
So if you're earning new coins or tokens, potentially at an agreed APY through a DeFi protocol - it's likely this would be seen as income. Therefore this could include:
Earning new crypto tokens through yield farming on lending protocols like AAVE or Compound
Earning new liquidity pool tokens, governance, or reward tokens
Engage to earn income
HMRC hasn't yet released guidance on engage-to-earn or play-to-earn platforms which appeared primarily in the DeFi space recently. However, as earning crypto through staking and mining is considered income, we can infer that earning tokens and coins through these platforms would also likely be considered income by HMRC. Examples of potential crypto income include:
Referral rewards like Binance Referral
Learn to earn campaigns, like Coinbase Learning Center or CoinMarketCap Learning Center
Watch to earn platforms like Odysee
Browse to earn platforms like Brave
Play to earn games like Axie Infinity
Shop to earn through browser extensions like Lolli
In summary - any time you're earning new tokens as a result of an investment activity, this is likely to be seen as Income and subject to Income Tax. You can learn more in our UK DeFi Tax guide.
How much tax will you pay on crypto income?
To figure out how much tax you'll pay on crypto income, you need to first know the crypto Income Tax rates. These are the same Income Tax Bands for your regular income. The UK uses a progressive income tax banding - so you won't pay the same flat rate of income on all your earnings, instead, you'll pay a higher rate of tax only on earnings in higher tax bands. 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.
Tax Rate | Taxable Income | Band |
---|---|---|
0% | Up to £12,570 | Personal Allowance |
20% | £12,571 - £50,270 | Basic Rate |
40% | £50,271 - £125,140 | Higher Rate |
45% | £125,140+ | Additional Rate |
The Autumn Statement reduces the additional rate Income Tax threshold from £150,000 to £125,140 from April 2023.
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
Calculating crypto income involves determining 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.
Example
Aida earns £4,000 in additional income from a variety of crypto investments. She needs to figure out how much Income Tax she'll pay on this.
She earns £40,000 in income in the 2021 financial year. Remember £12,570 of this is tax free.
This puts her in the basic rate tax allowance of 20%. Aida will pay 20% tax on her crypto income of £4,000, so a total of £800.
Is any crypto tax free?
Some! You won't always pay tax on crypto in the UK. Transactions that are tax free include:
Buying crypto with GBP
HODLing crypto
Transferring crypto between your own wallets
Donating crypto to charity
Gifting crypto to your spouse (use this to your advantage if your partner has not used their capital gains allowance this year!)
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. Find out more in our HMRC lost crypto tax guide.
However, 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.
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 for the 2023/2024 tax year and 2024/2025 tax year. This matters for your crypto because you subtract this amount when calculating what Income Tax band you're in. 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: We know we've harped on about this already - but it's a big deal. The UK had a Capital Gains Tax Free Allowance of £12,300 up until April 2023. From April 2023, this allowance halved to £6,000, and from April 2024, this allowance halved again to £3,000. This means for the 2023-2024 financial year you'll be filing for in January 2025, you have a £6,000 tax free allowance, and for the current 2024-2025 financial year, you have a £3,000 tax free allowance.
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 the financial year you'll be reporting on in 2025 is from the 6th of April 2023 to the 5th of April 2024. You need to report your taxes for this financial year by the 31st of January 2025. You'll declare all your crypto taxes in your Self Assessment Tax Return.
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. Please note the deadline for postal Self Assessment Tax Returns is the 31st of October 2024.
In the Spring Budget 2023, the former Chancellor announced that the government would introduce changes to the Self Assessment tax return forms and that investors would need to report crypto assets separately. It's not clear whether this will change again under the new government, but we'll update this article as soon as there's more information.
Do you pay tax when you buy crypto in the UK?
Yes and no - it depends on what you're buying crypto with. Let's break it down.
Buying crypto with GBP
TAX FREEYou're not taxed when you buy crypto with fiat currency - like GBP - in the UK.
But, it's really 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 your crypto gains and losses later on.
Buying and HODLing crypto
TAX FREEWaiting for the moon? Great plan and great news for your taxes. You'll 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 accurately calculate your capital gains and losses later on.
For those long-term HODLers, it may be worth using a platform that tracks and stores trading information for long periods of time, as exchanges often only keep information for a matter of months. This information can then easily be imported into Koinly to quickly find out how big your tax liability is.
Buying crypto with crypto
CAPITAL GAINS TAXCrypto trading in the UK is taxed. So if you're trading Bitcoin for Ether or any other cryptocurrency - you'll pay Capital Gains Tax. HMRC views this as two separate transactions. Trading your asset is a disposal - just like selling or spending it. They're not interested that you're using it to buy another asset, just that you're disposing of one. So it is the asset you dispose of that you'll pay Capital Gains Tax on if you've made a gain.
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.
Buying crypto with stablecoins
CAPITAL GAINS TAXStablecoins are cryptocurrencies that are pegged to a reserve currency, often a fiat currency. For example, the cryptocurrency USDT is tethered to the US dollar. This allows for reduced price volatility
Buying crypto with stablecoins is viewed as trading crypto for crypto, so any profits are subject to Capital Gains Tax.
Of course, you may not actually have any tax liability on these transactions as stablecoins are often pegged to a fiat currency and therefore the price remains relatively stable.
Despite this, you'll still need to keep a record of these transactions for HMRC.
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
CAPITAL GAINS TAXSelling crypto for fiat currency like GBP is a disposal and subject to Capital Gains Tax.
You'll pay either 10% or 20% on the profits from your sale, depending on how much you earn in regular income.
Example
Archie buys 1 ETH in July 2023. The price of ETH the day he buys it is £1,500. This is his cost basis.
He sold 1 ETH in November 2023 for £3,500. He needs to figure out his capital gain by subtracting his cost basis from his sale price.
£3,500 - £1,500 = £2,000. This is his capital gain.
Archie earns £40,000 a year. This puts him in the Basic Income Tax Band, so he'd pay 10% tax on his capital gains.
However, Archie has no other capital gains this year, so he is within the Capital Gains Tax free allowance of £6,000 (for 2023-2024 FY). He'll pay no tax on his capital gain.
Selling crypto for crypto
CAPITAL GAINS TAXSelling your crypto for another crypto is a disposal - so it's subject to Capital Gains Tax.
To calculate your capital gain or loss, subtract the cost basis of the asset you disposed of from the fair market value of the asset on the day you traded it.
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 - things are rarely this simple when it comes to UK crypto tax and transactions like transfer fees or adding and removing liquidity are a little more confusing from a tax perspective.
Moving crypto between wallets
TAX FREETransferring 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.
Think of moving crypto between wallets like moving fiat currency between two bank accounts that you own.
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
CAPITAL GAINS TAXWhen you transfer your crypto - your wallet provider or crypto exchange will often charge you a transfer fee to do so.
If you pay this transfer fee in fiat currency - like pounds - this is tax free.
However, 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.
Example
You bought 1 ETH. The price of 1 ETH when you bought it is £3,338.
You decide you want to move your ETH from your Binance wallet to your MetaMask wallet. Binance charges you a flat transfer fee of 0.005 ETH.
You're paying in ETH - so you're disposing of ETH. So you need to calculate your cost basis and the fair market value of your crypto at the point of disposal. To keep it simple, let's say the price of ETH hasn't changed since you bought it as you moved it straight out of your Binance wallet.
0.005 ETH = £16.70 This is your disposal. You don't have a capital gain or loss, but HMRC may wish to see records of disposals during tax compliance checks, so you should always keep a record of these disposals.
Koinly makes this easy with its "treat transfer fees as disposals" setting.
Adding or removing liquidity
CAPITAL GAINS TAXDeep into DeFi? Most DeFi protocols use liquidity pools. If you're investing in these, at a glance you might not think of them as a taxable event. They're more akin to transferring your crypto from one place to another because you're not actually disposing of the asset.
HMRC however disagrees. They say if you receive a liquidity pool token in exchange for your crypto - it's a disposal. You can add up your cost basis based on the tokens you've sent to the pool and then subtract that amount from the fair market value of the tokens at the point of disposal. Your liquidity pool tokens then inherit this as the cost basis for when you want to remove them from the pool.
How are airdrops and forks taxed in the UK?
HMRC has clear guidance on how both airdrops and forks are taxed in the UK. It's good news for forks, but bad news for airdrops. You'll pay no tax on soft or hard forks in the UK. But you'll pay both Income Tax and Capital Gains Tax on airdrops. Let's break it down.
Soft and hard forks
TAX FREEHMRC has clear guidance on how they tax forks.
For soft forks, you'll receive no new assets - you can't pay any tax.
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.
Receiving an airdrop
INCOME TAXIn most instances, HMRC says you'll pay Income Tax on airdrops.
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 most 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.
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.
Example
You receive 200 1INCH tokens from an airdrop. On the day you receive them, the fair market value per token is £3.50. Your tokens are subject to Income Tax, so you need to calculate their total worth.
£3.50 x 200 = £700. You've made an additional income of £700 which you need to pay tax on at your normal Income Tax rate.
You earn £45,000 a year. Your additional income of £700 doesn't push you into a higher tax band, so you'll pay 20% tax on £700, or a total of £140 in tax.
Selling or swapping coins from an airdrop
CAPITAL GAINS TAXThe bad news keeps on coming. Not only will you pay Income Tax when you receive an airdrop, but you'll pay Capital Gains Tax when you later sell, swap, spend, or gift coins or tokens you received from an airdrop.
Your cost basis for airdrops is the fair market value on the day you received them in GBP.
Example
You sell your 200 airdropped 1INCH tokens a couple of days after. The fair market value per token is £4, so you make £800. You already know your cost basis is £700.
£800 - £700 = £100. You've made a capital gain of £100.
Your income is £45,000. This puts you in the basic tax band, so you'll pay 10% in Capital Gains Tax, so a total of £10.
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 you can donate crypto to a registered charity tax free. Let's look at each different transaction.
Gifting crypto to a friend
CAPITAL GAINS TAXIf 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 pound 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 Taxation 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
TAX FREEYou 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.
Example
Mark buys 4 ETH for £1,000 each. He sells 3 ETH himself for £2,000, giving him a capital gain of £6,000. He can utilise his Capital Gains Tax allowance of £6,000 for the 2023-2024 financial year, leaving him with no taxable gain.
Mark wants to sell the remaining ETH, but doesn't want to pay tax on the gain. So he gifts 1 ETH to his wife Hannah. He pays no tax to do this.
Hannah receives the 1 ETH and sells it for £2,000. Hannah can utilise her Capital Gains Tax free allowance of £6,000, leaving her with no taxable gain.
Donating crypto to a registered charity
TAX FREEDonating 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.
In case they make a tainted donation — this refers to a situation where an individual makes arrangements with a charity to get some form of kickback/financial advantage.
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
Hobby miners will pay Income Tax on mined coins, as well as Capital Gains Tax when they later dispose of those mined coins. Meanwhile, for business miners, mining income will be added to trading profits and be subject to Income Tax.
Mining crypto as a hobby
INCOME TAX & CAPITAL GAINS TAXIf 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 the crypto at the time you receive it 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.
Also keep in mind that when you dispose of this crypto, that will be subject to Capital Gains Tax.
Mining as a business
INCOME TAXIf 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 day trading tax UK
HMRC doesn't have specific guidance on crypto trading like margin trading, crypto futures, and other CFDs. However, there is guidance on general day trading tax in the UK. 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
CAPITAL GAINS TAXIf 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
TAX FREESpread 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
DeFi is a fairly new concept, but HMRC released proposed guidance about it as of February 2022. You might think it's good news but it doesn't really clarify too much as it all comes down to how your specific DeFi protocol works.
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. Helpful, right?
To try and simplify this a bit more, a lot of your DeFi trades are going to be seen as disposals now. This includes adding/removing liquidity, staking crypto, and in some instances the rewards you receive from DeFi protocols - if you receive that reward in one large sum (like if you traded a liquidity pool token that had increased in value).
Meanwhile, returns may be seen as income in some instances. HMRC says this is more likely 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.
So if you're earning new tokens or coins on a periodic basis through your DeFi activities - this is more likely to be seen as income and subject to Income Tax.
The tax you'll pay on DeFi transactions depends on whether you're seen to be 'earning' crypto or 'disposing' of crypto. Anytime you're seen to be 'earning' crypto - you'll pay Income Tax. Anytime you're seen to be disposing of crypto by swapping it, selling it, or spending it - you'll pay Capital Gains Tax. Based on the current guidance from HMRC, we can infer DeFi taxes would likely break down into the following:
Lending/loaning crypto through DeFi protocols or P2P: Capital Gains Tax.
Interest payments from lending crypto: Income or Capital Gains Tax depending on how it's paid.
Borrowing from DeFi protocols: Capital Gains Tax when the loan is paid back.
Paying interest in DeFi protocols: An allowable expense.
Selling or swapping NFTs: Capital Gains Tax.
Buying NFTs: Capital Gains Tax if you pay in crypto. Tax free if it's GBP.
Staking rewards from DeFi protocols: Income Tax/Capital Gains Tax depending on how rewards are paid.
Yield farming rewards from DeFi protocols: Income Tax/Capital Gains Tax depending on how rewards are paid.
Earning liquidity pool tokens from DeFi protocols: Income Tax/Capital Gains Tax depending on how rewards are paid.
Adding liquidity to liquidity pools: Capital Gains Tax if you receive a liquidity pool token in return.
Removing liquidity from liquidity pools: Capital Gains Tax if you're exchanging a liquidity pool token to do so.
Earning through play/engage to earn DeFi protocols: Likely Income Tax.
Profits from DeFi margin trading and options protocols: Capital Gains Tax.
An important note, HMRC has announced a second 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. Koinly will be participating in the consultation and we'll update this guide as soon as more guidance follows.
Earning from DeFi protocols
INCOME TAXAnytime you're seen to be 'earning' from DeFi - whether that's 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.
Selling or trading tokens on DeFi protocols
CAPITAL GAINS TAXAnytime 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.
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
CAPITAL GAINS TAXSpending 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:
Identify all your taxable crypto transactions for the entire financial year you're reporting on.
Identify which transactions are subject to Income Tax and which transactions are subject to Capital Gains Tax.
Identify the cost base for each transaction using the Share Pooling Cost Basis Method.
Calculate your subsequent capital gains and losses, income, and expenses.
Subtract your net capital loss from your net capital gain.
If your net capital gain is less than the £6,000 Capital Gains Tax Allowance (for 2023-2024 FY), 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 use a crypto tax app like 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 800+ 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, make a coffee
Koinly will calculate your cost basis for each crypto asset like ETH, ADA, BTC, and many more. Koinly will 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 might 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
value of the transaction in pound 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 data. Again, using tax software like Koinly can help you maintain such a ledger.
How to file crypto taxes with paper forms
Still sticking to pen and paper filing? No worries, Koinly can help. Follow these steps:
Calculate your crypto tax with Koinly. You need to know your capital gains, losses, income, and expenses.
Register to file taxes online with the Government Gateway service by the 5th of October 2024 if you’re not already registered.
Fill out the Self Assessment Tax Return (SA100). Report any income from crypto over in box 17.
If you made crypto capital gains, check yes on box 7. Fill out the supplementary Self Assessment: Capital Gains Summary (SA108).
Submit your Self Assessment Tax Return to HMRC by midnight on the 31st of October 2024. Need more time? If you file online, you get until the 31st of January 2025.
How to pay tax on cryptocurrency UK
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 2025.
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!
How to avoid paying tax on cryptocurrency UK
There are ways to strategically - and legally - reduce your crypto taxes. To potentially pay less tax in 2025, you'll need to make your move before the end of the financial year - and big changes are coming to UK tax breaks. See our guide on how to pay less crypto tax legally by optimising your tax position before the 5th of April 2025.
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.
Look out for HMRC nudge letters
HMRC announced that it plans to probe digital currency holders over undeclared gains. The letters are sent to encourage crypto investors to pay the correct amount of Income Tax and Capital Gains Tax on their crypto asset holdings.
The best way to avoid an unwelcome visit from HMRC is to report and pay your crypto taxes accurately.
Which crypto exchanges report to HMRC?
But what about your specific UK crypto exchange? Does Binance report to HMRC? What about Coinbase and HMRC?
HMRC stated back in 2019 that they requested customer data crypto from exchanges that do business in the UK including Coinbase, eToro, and CEX. You might recall that in 2020, Coinbase handed over data on UK customers who transacted more than £5,000 worth of cryptocurrency between 2017 and 2019.
These are the only crypto exchanges they've named so far. But before you breathe a sigh of relief, just because HMRC hasn't named the crypto exchange you use doesn't mean they haven't contacted them. HMRC is cracking down on crypto - so it is safe to assume HMRC will have contacted all the major crypto exchanges doing business in the UK, such as Binance, Kraken, KuCoin, Gemini, CoinJar, Crypto.com, Bittrex, and Gate.io. The FCA is also involved, and has been cracking down on crypto businesses that fail to meet reporting requirements - in fact, they've only approved 4 crypto businesses to operate in the UK in the last 12 months!
Centralised and decentralised exchanges
The way HMRC is able to deal with individuals’ cryptocurrency taxes depends on what type of exchange they are using.
Centralised exchanges, such as Binance and Kucoin use a system referred to as KYC - Know Your Customer, which requires an Identify check to find out where you live and who you are, so your trades can be verified to you, similar to stock market trading.
Due to this KYC Identity check, your information will be passed along to HMRC, making them aware of any losses or gains you may have made in the past year.
On the other hand, decentralised exchanges such as Pancake Swap or Uniswap do not require any KYC and are completely decentralized, often referred to as DeFi, or Decentralised Finance as there is no centralised body. Users engaging with DeFi through private wallets, where only they have access to the keys, are much harder to track down for HMRC and are required to personally make sure they are filing their taxes properly.
Remember: HMRC will come looking if suddenly a large deposit of fiat is made into your bank account, or a large amount of cryptocurrency, whether it be Bitcoin, altcoins, or stablecoins, into an exchange wallet owned by you.
Your frequently asked questions
Still not found the answers you're looking for? Here are some of our most common questions about cryptocurrencies and the UK.
⚖ Is cryptocurrency legal in the UK?
Yes. It's legal to buy, sell, trade, spend, and gift crypto in the UK - as well as many other investments. The only investment activities "banned" by the Financial Conduct Authority (FCA) are crypto derivatives and ETNs. Even then, you're not going to end up in prison for opening a position. It is crypto exchanges operating in the UK that are unable to sell derivatives to UK consumers.
⛏ Is crypto mining legal in the UK?
Yes. Cryptocurrency mining is legal in the UK- whether that's Bitcoin, Dogecoin, or Monero.
🚫 Can crypto tax be avoided in the UK?
No - you can't outright avoid crypto tax without facing the wrath of HMRC. However, there are many steps you can take to optimise your tax position before the EOFY. Learn more in our guide on how to avoid crypto tax in the UK.
📝 How is crypto tax calculated UK?
You can calculate your capital gain or loss from each sale, swap, or spend by subtracting your cost basis from your sale price/fair market value at the point of the transaction. If you're accounting for multiple assets of the same kind, you'll need to use the Share Pooling Cost Basis Method.
🕵♂️ Can HMRC track Bitcoin?
Yes, HMRC can track Bitcoin and other cryptocurrencies. HMRC has a data-sharing program with large centralised exchanges to ensure tax compliance.
🪙 Does Binance report to HMRC UK?
HMRC rarely states which exchanges it has pressured to share customer data - but as one of the largest crypto exchanges in the world, it's very likely that Binance shares data with HMRC. Binance is highly compliant with tax authorities around the world, it's unlikely HMRC would be an exception to this.
🟡 Does Coinbase report to HMRC?
Yes. HMRC reached an agreement with Coinbase back in 2020. Coinbase agreed to share customer data for any users with more than £5,000 in crypto assets held on Coinbase during the 2019-2020 financial year.
💸 How much crypto can I sell without paying taxes?
In the UK, provided your net capital gain is less than £6,000 in the 2023-2024 financial year - you won't pay tax on crypto when you sell. This halved to £3,000 for the current 2024-2025 financial year.
📅 Do you only pay tax on crypto when you cash out?
No. Selling is just one of the taxable disposals in the UK. You'll also pay tax on any profits when you swap, spend or gift (excluding to spouse) crypto in the UK. As well as this, many crypto transactions are subject to Income Tax upon receipt.
💰 Do I need to report crypto if I didn't sell?
No. You don't need to report held crypto to HMRC as this is tax free.