Cryptocurrency Tax UK: HMRC Rules for Crypto Investors

Introduction

HMRC treats cryptocurrency as property, not currency. This means most crypto transactions are subject to Capital Gains Tax (CGT). This guide explains how crypto is taxed in the UK.

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When CGT Applies

You may owe Capital Gains Tax when you:

• Sell crypto for GBP or other fiat currency
• Exchange one crypto for another
• Use crypto to pay for goods or services
• Gift crypto (unless to spouse/civil partner)

When CGT Does NOT Apply

• Buying crypto with fiat currency
• Holding crypto
• Transferring between your own wallets
• Donating to charity

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Calculating Crypto Gains

The Formula

Gain = Disposal Proceeds - Allowable Costs

Allowable Costs

• Purchase price
• Transaction fees (buying and selling)
• Gas fees
• Exchange fees

Example

• Bought 1 BTC for £20,000
• Fees: £100
• Sold for £35,000
• Fees: £150

Gain: £35,000 - £20,000 - £100 - £150 = £14,750

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CGT Rates 2025/26

Your Tax Band	CGT Rate
Basic rate	10%
Higher/additional rate	20%

Annual Exempt Amount

£3,000 per year (2025/26) - gains below this are tax-free.

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Pooling Rules

HMRC uses "share pooling" for crypto:

• Same-day rule: Match disposals to same-day acquisitions first
• 30-day rule: Then match to acquisitions within 30 days
• Section 104 pool: Remaining matched to average cost of holdings

This prevents "bed and breakfasting" to crystallise losses.

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Crypto Income

Some crypto activities create Income Tax liability:

Mining

• Hobby mining: May be CGT only
• Mining as trade: Income Tax on value when received

Staking Rewards

• Income Tax on value when received
• CGT when later disposed

Airdrops

• Income Tax if received for service
• CGT only if genuinely unsolicited

DeFi

Complex area - yields may be income, gains may be CGT. Seek specialist advice.

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Record Keeping

What to Track

For every transaction:

• Date
• Type (buy, sell, exchange)
• Amount of crypto
• Value in GBP at time
• Fees paid
• Wallet addresses

Recommended Tools

• Crypto tax software (Koinly, CoinTracker, etc.)
• Spreadsheet tracking
• Exchange transaction history exports

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Reporting Requirements

When to Report

Report crypto gains through Self Assessment if:

• Gains exceed the annual exempt amount (£3,000)
• Total disposal proceeds exceed £50,000
• You want to claim losses

Deadlines

For 2025/26 tax year:

• Register by: 5 October 2026
• File online by: 31 January 2027
• Pay tax by: 31 January 2027

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Losses

Using Losses

Crypto losses can:

• Offset gains in the same year
• Carry forward to future years

Claiming Losses

Report losses to HMRC within 4 years of the tax year they occurred.

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FAQs

Do I pay tax on unrealised gains?

No. Tax is only due when you dispose (sell, exchange, gift, spend).

What about NFTs?

Same rules as other crypto assets - CGT on disposal.

What if I can't trace my costs?

HMRC may accept reasonable estimates, but will scrutinise. Keep best available records.

Are crypto gifts taxed?

Yes, CGT applies. Gifts to spouse/civil partner are exempt.

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Conclusion

Crypto taxation is complex but manageable with good records. Track all transactions, use pooling rules correctly, and report through Self Assessment. Consider specialist software or professional advice if you have significant holdings or complex DeFi activities.