Cryptocurrencies like Bitcoin and Ethereum have gained significant investor attention in recent years. While these digital assets are relatively new and regulations are still evolving, HMRC has confirmed they are taxable in the UK. Whether you owe taxes on cryptocurrency earnings depends on how you acquire them and the profit you generate. This guide covers essential information on UK crypto taxation, including Capital Gains Tax (CGT), Income Tax (IT), and exemptions.
Is Crypto Taxed in the UK?
The UK does not have a specific tax for cryptocurrencies, but HMRC classifies them as property. Existing tax laws apply to crypto activities, meaning investors may face CGT or Income Tax liabilities.
Capital Gains Tax (CGT)
- Applies when selling crypto as an investment.
- Triggered if net gains exceed the Annual Exempt Amount (£3,000 in 2024/25 and 2025/26).
- Rates: 10%–18% (Basic Rate) or 20%–24% (Higher Rate), depending on income.
Income Tax (IT)
- Applies to rewards from activities like mining, staking, or DeFi transactions.
- Taxed as miscellaneous income at your standard Income Tax rate (20%–45%).
When Is Crypto Subject to Capital Gains Tax?
A taxable disposal occurs when you:
- Sell crypto for GBP.
- Trade crypto for another crypto.
- Gift crypto (except to a spouse/civil partner).
- Spend crypto (e.g., purchases).
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Calculating Capital Gains
- Determine cost basis: Purchase price + fees.
- Subtract cost basis from disposal proceeds.
- Offset losses against gains in the same tax year (unused losses roll forward).
UK CGT Rates (2025/26)
| Income Band | CGT Rate |
|---|---|
| Basic Rate | 18% |
| Higher Rate | 24% |
Crypto Income Tax: Key Scenarios
HMRC taxes crypto rewards as income in these cases:
- Mining/staking rewards.
- Liquidity pool/lending rewards.
- Airdrops (if not considered capital gains).
- Employment income (e.g., crypto salaries).
Tax Rates
- Reported as "miscellaneous income".
- Trading allowance: £1,000 tax-free (if total income < £1,000).
UK Income Tax Bands (2024/25)
| Band | Rate |
|---|---|
| £12,571–£50,270 | 20% |
| £50,271–£125,140 | 40% |
| £125,141+ | 45% |
Tax-Free Crypto Transactions
- Buying crypto with GBP.
- Holding crypto.
- Gifting to spouses/charities.
- Transferring between personal wallets.
How to Reduce Crypto Tax Legally
Utilize allowances:
- CGT Annual Exemption: £3,000 tax-free gains.
- Trading Allowance: £1,000 tax-free income.
- Offset losses against gains.
- Donate crypto to charities for tax relief.
- Gift to spouses to pool allowances.
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Filing Crypto Taxes in the UK
- Self-Assessment Deadline: 31 January.
Report:
- CGT via SA108 form.
- Miscellaneous income on SA100 (Box 17).
- DeFi/frequent traders may need to file as self-employed.
Preparation Tips
- Maintain transaction records.
- Use crypto tax software (e.g., Recap).
- Consult a crypto-savvy accountant.
FAQs
1. Is crypto taxable in the UK?
Yes, as property (CGT) or income (IT), depending on activity.
2. What’s the CGT rate for crypto in 2025?
18% (Basic Rate) or 24% (Higher Rate).
3. Are airdrops taxable?
Yes, if they’re considered income (e.g., promotional rewards).
4. Can I avoid tax by holding crypto?
No tax applies until you dispose of it (sell, trade, spend).
5. How do I report crypto losses?
Offset against gains in the same year or carry forward.