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Are Crypto Gains Taxable in the UK? HMRC Rules Explained
Ruby Layram
2nd May 2025
One of the most common questions that UK investors ask about crypto is: Do I have to pay tax on gains that I make? The short answer is yes. The UK taxman wants his cut, and His Majesty’s Revenue and Customs (HMRC) has clear rules on how cryptocurrency gains are taxed.
But don’t panic. In this guide, we will break down exactly how cryptocurrency gains are taxed in the UK so that you can proceed with confidence and reduce the chance of a confrontation with the tax man!
The following information is intended as a rough guide only and does not constitute taxation advice and has not taken into account your personal circumstances. You should consult HMRC, or a taxation or financial adviser for assistance with your taxation obligations.
Are Crypto Gains Taxable in the UK?
Yes. HMRC considers cryptocurrency to be a taxable asset, not actual currency. That means if you make a profit from buying and selling crypto, it’s subject to Capital Gains Tax (or CGT).
Just like stocks, shares, or property, crypto is treated as an investment. So if you sell it for more than you bought it, you could owe tax on the profit.
But that’s not the full picture. Different types of crypto transactions are taxed differently, so let’s go through them one by one.
When Do You Have to Pay Tax on Crypto Gains?
HMRC will expect you to pay tax in the following situations:
1. Selling Crypto for GBP (or any type of currency!)
If you bought Bitcoin at a low price and later sold it for a profit in pounds, dollars, or any other fiat currency, that’s a taxable event.
HMRC will want to know how much you gained, and if it exceeds the tax-free threshold, you’ll have to pay CGT.
2. Swapping One Crypto for Another
Many people think tax only applies when converting crypto into fiat, but swapping one crypto for another (such as Bitcoin to Ethereum) is also taxable. HMRC sees this as “disposing” of an asset, meaning you’ll have to work out the profit or loss from the trade and report it.
3. Using Crypto to Buy Goods or Services
Yes, even spending your crypto can be a taxable event!
If you buy something with Bitcoin (like a Tesla, a coffee, or even an NFT), HMRC sees this as a disposal and expects you to calculate any capital gain.
If there was a gain, you should keep a record of this and pay tax on this in your self assessment.
4. Getting Paid in Crypto
If your employer pays you in Bitcoin, Ethereum, or any other digital currency, this is treated as income.
That means you’ll pay income tax and national Insurance just like you would on a normal salary.
The same goes for freelancers or contractors who accept crypto as payment.
5. Earning Crypto Through Mining, Staking, or Airdrops
If you participate in any kind of income-generating activity using your crypto, you will need to pay the tax man!
Mining rewards
Crypto mining rewards are considered taxable income because they are treated like earnings from a business or self-employment.
If mining is your hobby, you’ll pay income tax on the fair market value of the coins at the time of receipt. If it’s a full-time business,the activity will need to be treated like a self-employed business, subject to national insurance and income tax.
Crypto staking
Staking rewards are also taxable under income tax because they represent passive income earned on your holdings, similar to earning interest on savings. You’ll be taxed on the value of the rewards at the time they’re received.
Just like mining, if staking is your hobby, you’ll pay income tax on the fair market value of the coins at the time of receipt. If it’s a full-time business,the activity will need to be treated like a self-employed business, subject to national insurance and income tax
Airdrop rewards
Airdrops (free crypto given as a promotion or reward) may be subject to Income Tax if they are received in exchange for providing a service or being actively involved in a project.
However, if an airdrop is given with no conditions (e.g., you receive free tokens without doing anything in return), it might not be taxed as income but could still be subject to capital gains tax when sold.
How Much Crypto Tax Do You Need to Pay?
The amount you pay depends on Capital Gains Tax rates and whether you exceed the annual tax-free allowance.
If the total of all of your income is less than £100,000 you get a personal allowance of £12,570, meaning you don’t pay any tax on the first £12,570 you make, regardless of the source. If you make over £100,000, your personal allowance decreases by £1 every £2. So, if you make above £125,140, you don’t have a personal allowance. (This applies to the 2024/2025 tax period).
Capital Gains Tax Rates for Crypto
- Every UK individual has a tax-free capital gains allowance of £3,000 (for the 2024/25 and 2025/26 tax year). This is above the personal allowance.
- If your total gains exceed this threshold, you’ll pay:
- 18% tax if you’re a basic-rate taxpayer (earning under £50,270 a year).
- 24% tax if you’re a higher-rate taxpayer (earning over £50,270 a year).
Income Tax on Crypto Earnings
If you earn crypto through mining, staking, or as payment for work, you’ll be taxed as follows:
- Personal Allowance: 0%
- Basic rate: 20%
- Higher rate: 40%
- Additional rate: 45%
If you live in Scotland, the income tax brackets are slightly different:
- Personal Allowance: 0%
- Starter Rate: 19%
- Basic Rate: 20%
- Intermediate Rate: 21%
- Higher Rate: 42%
- Advanced Rate: 45%
- Top Rate: 48%
Plus, you might have to pay National Insurance contributions too.
If you are running a business, these rates are;
- 6% on profits of £12,570 – £50,270
- 2% on profits over £50,270
If you receive crypto through payroll, these rates are;
- 8% on income between £12,576 – £50,268
- 2% on income above £50,268
How to Report Crypto Gains to HMRC
You’ll need to report your crypto gains on a Self-Assessment tax return. Here’s how:
- Keep records: Track every trade, purchase, sale, and swap. Use a crypto tax calculator or an app like Koinly, CryptoTaxCalculator or CoinTracker to make this easier.
- Work out your gains: Subtract the cost of acquisition from your selling price to calculate your taxable profit. These costs can include transaction fees, advertising to a buyer, creating a contract, etc.
- Report to HMRC: If your total gains exceed £3,000, you’ll need to submit a Self-Assessment return by January 31st of the following tax year.
- Pay what you owe: HMRC will let you know how much you owe, and you can pay online.
Crypto Tax Loopholes & How to Reduce Your Bill
Nobody likes paying more tax than necessary, so here are a few legal ways that you could use to reduce your crypto tax bill.
1. Use Your Tax-Free Allowance
Make sure you’re using the £3,000 CGT exemption. If you’re close to the limit, consider selling some assets in different tax years to stay under the threshold. If crypto is your sole source of income, you can also use your personal allowance and trading allowance (£1,000).
2. Offset Losses
If you’ve made a loss on crypto (and let’s be real, we’ve all been there!), you can offset losses against gains to reduce your tax bill.
Make sure you report losses to HMRC so you can carry them forward to future years.
3. Gift Crypto to Your Spouse
HMRC allows tax-free transfers between spouses, so if your partner hasn’t used their £3,000 allowance, you can gift crypto to them to spread the gains and reduce your tax liability.
4. Consider Holding for the Long Term
If you sell crypto frequently, HMRC might classify you as a trader rather than an investor, meaning you could be taxed under Income Tax rules instead of CGT.
Holding long-term could help keep you in the lower-tax bracket.
What Happens if You Don’t Pay Crypto Tax?
HMRC is cracking down on crypto tax evasion, and they have access to transaction data from major exchanges. If you fail to report your gains, you could face:
- Hefty fines
- Interest charges
- In extreme cases, criminal prosecution
So, it’s worth staying compliant!
Crypto may be decentralised, but tax laws aren’t. If you’re making gains, HMRC expects its share. By keeping good records, knowing your tax obligations, and using legal tax-saving strategies, you can avoid nasty surprises and keep more of your hard-earned profits.
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Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence. When investing your capital is at risk.
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