Cryptocurrency is a type of digital money that uses cryptography to keep it secure and works on decentralised blockchain networks. Crypto assets include cryptocurrencies, tokens, and non-fungible tokens (NFTs), which show ownership or rights to something.

Taxable crypto assets include Bitcoin, Ethereum and NFTs, all of which are subject to cryptocurrency tax in the UK. The main difference between crypto as currency and as assets is how they are used.

Crypto as currency is meant for buying and selling, similar to regular money, while crypto as assets represent ownership or investments and may be taxed on profits when sold. Let’s take a closer look at crypto tax in the UK.

Do I have to pay tax on crypto in the UK?

You have to pay tax on crypto. For most crypto investors, crypto tax is an important consideration. When you sell or exchange cryptocurrencies, any profits made may be subject to capital gains tax on crypto in the UK.

This applies not only to selling for cash but also to trading one cryptocurrency for another or using it to purchase goods and services. Additionally, income from activities like mining or staking may be liable for income tax.

Don’t forget about personal tax allowances, which can help reduce your overall tax liability. Keeping detailed records of your transactions is also important for complying with HMRC regulations.

When do you pay tax on cryptocurrency?

You have to pay on cryptocurrency in several situations:

1) Selling crypto for fiat

When you sell your cryptocurrency for fiat currency, such as GBP, any profit you make is subject to Capital Gains Tax (CGT).

2) Trading one crypto for another

If you exchange one cryptocurrency for another, this is also considered a taxable event. You may need to calculate the profit or loss based on the market value at the time of the trade.

3) Using crypto to buy goods or services

Spending cryptocurrency to purchase goods or services triggers a taxable event. You will need to report any gains made from the transaction.

4) Earning crypto through mining, staking or airdrops

Income earned from mining, staking or receiving airdrops is subject to income tax. The value of the crypto at the time you receive it will determine your taxable income.

5) Receiving crypto as payment

If you receive cryptocurrency as payment for goods or services, this is treated as income, and you must pay income tax based on its value at the time of receipt.

On the other hand, buying and holding cryptocurrency or transferring crypto between your own wallets are considered non-taxable events by HMRC, meaning you won’t incur any tax liabilities in these situations.

Types of crypto taxes in the UK

Crypto can be subject to both Capital Gains Tax and Income Tax, depending on the type of transaction.

Capital Gains Tax

When you sell or trade cryptocurrencies, any profit you make might be taxed under CGT, making it important to understand how crypto tax in the UK works.

For the tax year 2024/25, you have an annual CGT allowance of £6,000. This means you can make up to £6,000 in profits from selling or trading crypto without paying any tax. If your profits go over this amount, you'll need to pay tax on the extra profit.

Income Tax on crypto

You pay Income Tax when you earn cryptocurrency, not just when you sell it. This includes earnings from mining, staking or getting paid in crypto for goods and services.

If you receive cryptocurrency as payment, you need to report its value as income based on the market price at that time. This income will then be taxed at your normal income tax rates.

How to report cryptocurrency gains and income to HMRC

To report cryptocurrency gains and income to HMRC, you need to use a Self Assessment tax return. This is the process where you declare your earnings and pay any taxes owed.
When reporting, you’ll need to include details about your capital gains from selling or trading crypto and any income earned from mining, staking or receiving crypto as payment.

Deadlines for crypto tax reporting

The deadline for submitting your Self Assessment tax return is usually 31 January following the end of the tax year. For example, for the tax year that ends on 5 April 2024, the deadline to submit your return and pay any tax owed is 31 January 2025.

It’s important to stay aware of these deadlines, especially for crypto tax in the UK. Make sure to keep accurate records of your transactions to make reporting easier and to ensure compliance with HMRC regulations.

Crypto tax rebates and reliefs

To minimise your crypto tax liability, there are a number of simple strategies you can consider.
One effective option is to use your annual Capital Gains Tax allowance, which is £6,000 for the tax year 2024/25. This means you can make some profit from crypto sales without paying tax.

You can also offset any losses against your gains, which can lower the total tax you owe.
Additionally, some investors may be eligible for crypto tax rebates, which can help you get back taxes paid on losses or other qualifying activities.