Crypto Tax UK - Guide to Crypto Tax, Filing & Payments

The surge of cryptocurrencies has opened up exciting opportunities for traders, investors, and even casual buyers in the UK. Digital assets like Bitcoin, Ethereum, NFTs, and DeFi tokenshave have opened new ways of wealth accumulation. However, these opportunities come with a big responsibility: knowing the Crypto Tax UK regulations and meeting your legal requirements.

In the UK, HMRC views crypto differently than traditional currency. You run the risk of triggering a tax event each time you sell, trade, swap, or spend your crypto. These rules are applicable regardless of whether you've profited from a single transaction or if mining or staking are your sources of ongoing revenue.

If you don't comply with Crypto Tax UK's regulations, you could be subject to interest payments, fines, or, in extreme situations, legal action. Knowing how cryptocurrency is taxed, how to keep accurate records, and how to properly file your taxes are therefore essential.

This guide aims to simplify Crypto Tax UK for you, covering the types of taxes, rates, filing steps, and even tips on how to legally reduce your tax bill, so you can trade confidently and stay compliant with the law.

Whether you’re actively trading or passively holding digital assets, you need to be aware of when HMRC expects you to pay tax. Here are the main crypto activities that are subject to tax:

1. Buying and Selling Cryptocurrency

Any profit you make from selling cryptocurrencies for fiat money or trading one cryptocurrency for another (such as Bitcoin for Ethereum) is subject to capital gains tax. The difference between the purchase and sale prices of the cryptocurrency is the taxable amount. You must declare and pay taxes on any profit that exceeds your CGT allowance.

2. Trading Cryptocurrency

Frequent cryptocurrency purchases and sales that demonstrate that the activity goes beyond simple investment could be classified as trading. Any profits in this situation might be liable to income tax instead of CGT. If your cryptocurrency activity is consistent and organised like a trading operation, HMRC might consider it to be a business.

3. Mining and Staking Cryptocurrency

Crypto mining is the process of solving complex algorithms to validate transactions and earn new coins as a reward. Similarly, staking is locking up crypto to help maintain blockchain networks and earn interest or rewards. The value of the cryptocurrency you mine or stake is liable to income tax since HMRC views both activities as income. These earnings must be reported on your tax return.

4. Airdrops

Depending on the situation, receiving bitcoin through an airdrop -a free distribution of tokens, may be considered taxable income. HMRC classifies an airdrop as income if it is received as part of an ongoing service or business activity, and you will be responsible for paying income tax on the amount of the airdrop at the time you receive.

5. Getting Paid in Cryptocurrency

Receiving cryptocurrency in exchange for products or services is regarded as income and is liable to income tax. At the moment of receipt, you must exchange the cryptocurrency's value for GBP and include the difference in your taxable income.

6. Gifting Cryptocurrency

If the value of the cryptocurrency has increased since you purchased it, gifting it to someone (apart from your spouse or civil partner) is considered a disposal by HMRC and is therefore liable to capital gains tax.

How is Crypto Taxed in the UK?

HMRC taxes crypto in two main ways, Capital Gains Tax (CGT) and Income Tax. Which one applies depends on how you earn or profit from your digital assets.

As crypto is classified as a type of asset, simply buying and holding digital currencies doesn’t trigger a tax event, but if you sell, trade, or earn profit from them, you may need to pay Capital Gains Tax (CGT) on the increase in value.

On the other hand, if you earn cryptocurrency through activities like mining, staking, or as payment for services, it’s considered taxable income and subject to income tax.

HMRC’s perspective is quite simple: if you make a profit from your crypto activities, you might have to pay tax. How much you owe depends on how you generated that profit, whether through capital gains or as income.

Capital Gains Tax (CGT)

When CGT Applies

When you sell, trade, or convert your bitcoin, you might have to pay CGT. These activities are regarded by HMRC as "disposals," which may result in a taxable gain. Among the examples are:

• Selling Bitcoin for pounds sterling
• Swapping Ethereum for another token
• Using crypto to buy goods or services
• Gifting crypto to someone other than your spouse or civil partner

You might be able to record a capital loss and use it to offset future gains if you sell your cryptocurrency for less than you purchased for it.

Current CGT Allowance

Before paying CGT, you can earn up to £3,000 in profits during the 2024/25 and 2025/26 tax years. This is your CGT allowance for the year. Gains over this threshold will be subject to the applicable tax rate. If your total gains for the year are below this threshold, you do not owe any CGT.

CGT Rates 2025/26

If your crypto profits exceed the Capital Gains Tax allowance of £3,000, you’ll have to pay crypto tax at the following rates:

• Basic-rate taxpayers pay 18% on gains above the allowance.
• Higher-rate and additional-rate taxpayers pay 24% on gains above the allowance.

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CGT Example Calculations

Here are some examples to illustrate how CGT is calculated:

Example 1: Selling Crypto for Fiat

• Acquisition Cost: £2,500 (amount paid to buy the crypto)
• Disposal Value: £6,000 (amount received from selling the crypto)
• Gain: Gain = £6,000 − £2,500 = £3,500

With a gain of £3,500, you exceed the £3,000 allowance. You will owe CGT on the amount above the allowance.

Taxable Gain: £3,500−£3,000=£500

You will pay CGT on the £500 taxable gain.

Example 2: Trading Crypto

• Acquisition Cost: £4,000 (cost of the crypto you traded)
• Disposal Value: £6,500 (market value of the new crypto you received)
• Gain: Gain = £6,500 − £4,000 = £2,500

With a gain of £2,500, which is below the £3,000 allowance, you won’t pay CGT on this gain.

Example 3: Mixed Transactions

• Acquisition Costs: £2,000 (for Crypto A) and £1,500 (for Crypto B)
• Disposal Values: £3,000 (from Crypto A) and £1,200 (from Crypto B)
• Gains:
  Gain from Crypto A = £3,000 − £2,000 = £1,000
  Gain from Crypto B = £1,200 − £1,500 = −£300 (loss)
• Net Gain: Net Gain = £1,000 − £300 = £700

With a total net gain of £700, which is below the £3,000 allowance, you won’t pay CGT on this amount.

Income Tax on Crypto

When Income Tax Applies

Cryptocurrency is typically considered income if you receive it as payment or as a reward. Common examples include:

• Mining rewards – The coins you earn from verifying transactions on a blockchain
• Staking rewards – Tokens received for locking your crypto in a network
• Airdrops – Free coins given as part of a promotion or network launch (taxable if you receive them in exchange for a service or action)
• DeFi yields – Interest or rewards from decentralised finance lending and liquidity pools
• Payments for work or services – Freelancers or employees paid in crypto

Income Tax Rates and Allowances

Your income can be offset by your Personal Allowance, which is now £12,570 for the majority of people in 2025/2026. Then:

• Basic-rate taxpayers pay 20% on income up to £50,270
• Higher-rate taxpayers pay 40% on income from £50,271 to £125,140
• Additional-rate taxpayers pay 45% on income above £125,140

Employment Income vs Miscellaneous Income

• HMRC regards cryptocurrency as employment income and taxes it using PAYE if you get it as part of your salary or wages.
• It is categorised as miscellaneous revenue if you get it from unpaid activities like mining, staking, or airdrops. You must report it on your Self Assessment tax return and may also need to pay National Insurance contributions.

Capital Gains Tax vs Income Tax on Crypto – Key Differences

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Watch below HMRC video to understand how cryptocurrency is taxed in the UK:

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Who Needs to Pay Crypto Tax in the UK?

Both individuals and businesses need to pay crypto tax. Tax obligations vary depending on your involvement with cryptocurrency and whether you're operating as an individual or a business.

HMRC has clear rules on how to calculate gains or income from crypto, let's break them down in step by step process:

Step 1: List all taxable crypto transactions

Compile a list of all the sales, trades, swaps, and cryptocurrency payments you made during the tax year.

Step 2: Calculate the earnings

Make a note of the amount in pounds sterling at the time of each transaction. Even if the trade was crypto-to-crypto, you still need to record the GBP value.

Step 3: Determine the cost basis

This is the amount you originally paid for the crypto, plus any allowable costs such as transaction fees.

Step 4: Calculate your gain or loss

Deduct your cost basis from the sale value. If the result is positive, it’s a gain; if negative, it’s a loss.

Step 5: Apply the annual allowance

Before working out your taxes, deduct your capital gains tax allowance (£3,000 for 2025/26) from the total gains.

Step 6: Calculate the tax owed

Depending on your income bracket, apply the relevant CGT or income tax rate.

Note: If you don’t want to go through the hassle of manual calculations, you can save time and reduce errors by using our Crypto Tax Calculator, which works out crpyo tax you owe n minutes.

Step 1: Gather Your Records

• Collect all records of your cryptocurrency transactions, including buying, selling, trading, and receiving crypto. This includes transaction dates, amounts, and values.
• Use exchange statements, wallet histories, and any other documentation that shows your crypto activity.

Step 2: Calculate Your Gains and Losses

• For each transaction, determine the acquisition cost and disposal value to calculate your gain or loss.
• Use the formula: Gain or Loss = Disposal Value − Acquisition Cost
• Sum up all your gains and losses over the tax year to determine your total capital gain or loss.

Step 3: Determine Your Income from Crypto

• Add up all income from crypto activities, such as mining rewards, staking rewards, and airdrops.
• Report this income along with your other sources of income, such as salary or freelance work.

Step 4: Complete Your Self-Assessment Tax Return

• Register for self-assessment or Log in to your HMRC online account and complete the Self-Assessment tax return form.
• Enter your calculated gains under the "Capital Gains" section and your earnings under the "Income" section.
• Ensure that all information is accurate and that you have included all sources of crypto income and gains.

Step 5: Submit Your Tax Return

• Review your completed tax return for any errors or omissions.
• Submit your tax return online through the HMRC website or by post before the deadline.

If you’d prefer a professional to handle everything for you, GoForma offers a Cryptocurrency Self Assessment Tax Return service for just £220 + VAT (one-time), making the process simple and stress-free.

To make tracking and reporting your crypto transactions easier, consider using software like Koinly which offers automated calculations and integrates with various exchanges. With Koinly you automatically get cryptocurrency capital gains calculations across:

• 23,000+ cryptocurrencies
• 400+ exchanges
• 100+ wallet providers

How to Pay Your Crypto Tax

Once you are aware of your options and have a plan, paying your crypto tax in the UK is simple. You can select the payment method that works best for you from the options provided by HMRC.

Payment methods accepted by HMRC

HMRC accepts different payment methods for your tax bill, including:

• Online or telephone banking (Faster Payments, CHAPS, Bacs) 
• Debit or corporate credit card 
• Direct Debit 
• Bank or building society 
• Cheque by post

Rather than rushing to find the money to pay tax at the end of the tax year, plan in advance. After every trade or at regular intervals, calculate your possible tax liability and monitor it. To get assistance, you can utilise accounting software, basic spreadsheets, or a crypto tax calculator.

HMRC Deadlines

1. Paper Tax Return Deadline - If you choose to file your tax return by post, the deadline is October 31st, following the end of the tax year. For the 2025/26 tax year, the deadline is October 31, 2026.
2. Online Tax Return Deadline - If you file your tax return online, the deadline is January 31st, following the end of the tax year. For the 2025/26 tax year, the deadline is January 31, 2027.
3. Payment Deadline - Any tax due must be paid by January 31st following the end of the tax year. For the 2025/26 tax year, payment is due by January 31, 2027. If your bill is over £1,000, you might also need to make payments on account for the following year.

Penalties for Not Reporting Crypto Taxes

If you fail to timely or accurately report your crypto taxes, HMRC may impose penalties. Whether your error was intentional or not, as well as how fast you fix it, determines the penalties:

• Late Filing Penalty: HMRC will impose a £100 fixed penalty if you fail to file your self-assessment tax return by the deadline, which is typically January 31st. The penalties increase with the amount of time you postpone.
• Failure to Report: Depending on how much tax you owe, HMRC may charge penalties if you fail to report taxable cryptocurrency transactions. Depending on how careless or deliberate your failure to report was, these penalties might range from 0% to 100% of the unpaid tax.
• Interest on Overdue Tax: HMRC levies interest on any overdue taxes from the initial due date in addition to penalties.

How to Resolve Missed Declarations or Incorrect Filings

‍To avoid penalties, always report your cryptocurrency transactions accurately and on time. Here are steps to stay compliant:

• Amend Your Tax Return: You can use your HMRC online account to make changes to your tax return if you discover that you missed reporting certain transactions or made an error in your cryptocurrency tax return. Correcting errors voluntarily might lessen fines.
• Keep Detailed Records: Keep an accurate record of every cryptocurrency transaction, including dates, quantities, and GBP values.
• File on Time: Submit your self-assessment tax return before the deadline. To ensure that you don't overlook any crucial dates, set reminders.
• Contact HMRC for Guidance: If you’re unsure how to correct your filings or missed reporting, contact HMRC for help. They can provide guidance on how to make things right and avoid further penalties.
• Consult a Crypto Accountant: Get expert advice if you're unclear about your crypto tax responsibilities. A crypto accountant can help you understand the rules and file accurately.

What Records You Need to Keep for Crypto Taxes

Maintaining thorough records of all your cryptocurrency transactions is crucial for accurate tax filing and for staying out of trouble with HMRC. Maintaining accurate records makes it easier to declare your income, calculate your earnings, and apply for any exemptions or reliefs. The following is a helpful list of records you should maintain:

1. Transaction Details

• Dates: Whether you're trading, buying, or selling cryptocurrencies, be sure to record the date of each transaction. Accurate dates are essential for calculating gains or losses and identifying the tax year in which the transaction occurred.
• Amounts: Keep track of the amount of cryptocurrency involved in each transaction, such as the number of Bitcoin or Ethereum you purchased or sold.
• Values in GBP: You need to record the value of each transaction in British pounds (GBP) at the time it took place. Use the market rate on the day of the transaction to determine the GBP value.

2. Purchase and Sale Prices

• Purchase Price: Write down the whole cost of the cryptocurrency, including any costs (such as exchange or transaction fees). You can use this information to determine your capital gains upon sale.
• Selling Price: Record the amount you received when you sold your cryptocurrency, again including any fees that were deducted.

3. Gains and Losses

• Capital Gains: For every transaction, calculate the difference between the purchase price and the selling price. This will show your profit or loss, which is essential for calculating your tax liability and filing reports to HMRC.
• Capital Losses: Keep track of any losses you incur when selling cryptocurrencies since you may be able to use them to offset gains and reduce your tax obligation.

4. Income from Crypto

• Mining and Staking Income: Record the value of any cryptocurrency you earned through mining or staking at the time it was received. This income is subject to Income Tax, so you’ll need to declare it in GBP.
• Airdrops and Gifts: If you receive cryptocurrency through airdrops or as a gift, record the value of the coins at the time you received them.

5. Crypto-to-Crypto Transactions

• If you exchange one cryptocurrency for another (e.g., swapping Bitcoin for Ethereum), this is treated as a disposal, and you must calculate any gain or loss based on the value of both cryptocurrencies at the time of the transaction.

6. Receipts and Invoices

• Receipts for Purchases: Save any confirmation emails or receipts you receive from cryptocurrency exchanges that detail your purchase, the amount you paid, and any associated costs.
• Invoices for Sales or Payments: If you sell cryptocurrency or receive payments in crypto, keep copies of the invoices or transaction records showing how much you received.

7. Wallet and Exchange Statements

• Keep records from your cryptocurrency wallets or exchanges that show a history of your transactions. Many exchanges provide downloadable statements that list all your buys, sells, and transfers in one place.

8. Costs Related to Crypto Activities

• Transaction Fees: When purchasing, selling, or transferring cryptocurrencies, keep track of any fees you pay as these may lower your total capital gains.
• Mining or Staking Costs: If you incur costs from running mining or staking operations (such as electricity or hardware costs), you may be able to deduct these expenses from your income.

You can claim certain expenses related to your crypto activities you can deduct from your overall taxable gains. These deductions help reduce your total tax liability. You can claim the following tax-deductible cryptocurrency expenses:

Transaction Fees

• Exchange fees for buying or selling crypto
• Blockchain transaction fees (e.g., gas fees on Ethereum)

Costs of Acquiring Cryptocurrency

• Purchase price of the cryptocurrency
• Fees related to acquiring the crypto (e.g., exchange fees at the time of purchase)

Professional Services

• Accountant fees for preparing crypto-related tax returns
• Costs for crypto tax software subscriptions

Equipment and Electricity Costs (For Miners)

• Mining hardware (e.g., GPUs, ASIC miners)
• Electricity costs for running mining operations
• Maintenance costs for mining equipment

Advertising and Marketing Costs (For Traders and Businesses)

• Expenses for promoting crypto trading services or products

1. Failing to Track All Transactions: Many people overlook small or infrequent transactions, but every buy, sell, trade, and receipt of cryptocurrency needs to be tracked. Missing these transactions can lead to incorrect reporting and tax liabilities.
2. Not Converting Crypto to GBP: When calculating gains or income, you must convert cryptocurrency values to GBP (British pounds) at the time of each transaction. Neglecting to do this can result in inaccurate calculations.
3. Misclassifying Crypto Transactions: Misunderstanding whether a transaction is a capital gain or income can lead to errors. For example, staking rewards are treated as income, not capital gains. Ensure you classify each transaction correctly according to HMRC guidelines.
4. Ignoring Fees and Costs: Transaction fees and costs associated with buying or selling crypto can be deducted from your gains. Failing to account for these costs can result in an inflated taxable gain.
5. Inaccurate Record-Keeping: Failing to maintain accurate, detailed records of your crypto transactions can make tax reporting difficult and lead to errors.
6. Relying Only on Exchange Statements: Many crypto traders rely solely on exchange statements for their tax records. However, exchange data can be incomplete or inaccurate, leading to errors in your tax filing.
7. Assuming HMRC can’t track crypto transactions: Some believe HMRC can’t track crypto, but they can. They work with major exchanges, request transaction data, and send “nudge letters” to those who don’t report. Acting as if your activity is invisible could lead to unwanted attention from the tax office.

Here are some effective strategies to help reduce your crypto tax liability in the UK:

1. Use Your Capital Gains Tax Allowance: You can get up to £3,000 in capital gains tax-free each year. This implies that you can trade cryptocurrency and earn up to £3,000 without having to pay taxes. To lower your taxable gains, make sure to utilise this allowance annually.
2. Offset Losses Against Gains: If you've incurred losses from selling cryptocurrency, you can offset these losses against any gains you've made. This lowers the total amount of capital gains that you must pay taxes on. Make sure to report all losses to HMRC.
3. Strategic selling to reduce tax liability: If you plan to invest in crypto long-term, holding onto your assets for a long term can help you manage your tax liability. You can time the sale of your crypto to fall into a tax year where you expect to have lower gains or income.
4. Gifting Cryptocurrency: You can transfer cryptocurrency to your spouse or civil partner tax-free. This allows you to split your gains and make use of both your capital gains allowances, effectively doubling the tax-free threshold.
5. Claim Deductible Expenses: Deduct any transaction fees, acquisition costs, and professional services related to your crypto activities. These expenses reduce your taxable gains and are important to track for accurate reporting.
6. Invest in ISAs: While you can't hold crypto directly in an Individual Savings Account (ISA), you can use your tax-free ISA allowance to invest in assets like stocks and shares, which may include crypto-related companies. This approach helps diversify your portfolio while you enjoy tax-free growth.

Need Help with Your Crypto Taxes?

Crypto tax can be complicated, and even small mistakes can lead to big issues with HMRC. To make sure you’re handling your crypto taxes correctly, consult with professional crypto accountants. GoForma offers expert advice to help you manage the crypto taxation. Whether you’re a casual investor or a full-time crypto trader, GoForma has the expertise to ensure your taxes are managed correctly and efficiently. Book a free consultation today for personalised crypto tax advice!

FAQs on Cryptocurrency Tax UK

Do I have to pay tax if I only hold crypto?

No, you don’t pay tax just for holding crypto. Tax only applies when you sell, trade, or use it and make a profit.

How does HMRC know about my crypto?

HMRC can get information from UK-based and some overseas crypto exchanges, as well as through data-sharing agreements with other countries. They can also check your bank records if needed.

Can I pay my tax bill in crypto?

No, HMRC only accepts payments in pounds sterling, so you can’t pay your tax bill with cryptocurrency.

Is there a minimum amount before tax applies?

Yes, you only pay Capital Gains Tax on crypto if your total gains in the tax year are above the annual CGT allowance, which is £3,000 for 2025/26.

Do I need a crypto tax accountant?

While you can work out your crypto tax yourself, a crypto tax accountant can save you time, help you avoid mistakes, and make sure you claim all possible reliefs. You can use GoForma's crypto accountants to get professional help and advice.

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

No. You don’t pay tax when you buy crypto in the UK. Tax usually applies when you sell, trade, or spend crypto and make a gain.

Is trading crypto for crypto taxable?

Yes. Trading one cryptocurrency for another is taxable in the UK. HMRC treats it as if you sold the first crypto, so Capital Gains Tax may apply on any profit.

Do you pay tax when transferring crypto?

No, you don’t usually pay tax when transferring crypto between wallets you own.

Is cryptocurrency legal in the UK?

Yes, it is perfectly legal to buy, sell, hold, and trade cryptocurrency in the UK. HMRC treats crypto as asset, so you can own it, but not use it as official money (like pounds).

Do you only pay tax on crypto when you cash out?

Not exactly, in the UK, you can owe tax on crypto when you swap, spend or gift (excluding to spouse) crypto in the UK.