If you have bought, sold, or earned cryptocurrency in the UK, you might be wondering if you need to pay tax on it. Many people think crypto is outside the tax system, but that is not true. HMRC has clear rules on how crypto is taxed, and it treats it like property, not currency.
So, understanding crypto taxes can feel confusing at first, but there are different rules depending on what you did with your crypto. Whether you made a profit from trading or earned rewards through staking or mining, you could have a tax bill waiting. You do not want to ignore it, because failing to report crypto taxes can lead to penalties.
This UK crypto tax guide will cover whether you need to pay tax, the difference between capital gains and income tax, examples of taxable transactions, tax rates and allowances, how to report to HMRC, ways to reduce your tax bill, and common questions.
Do You Pay Tax on Crypto in the UK?
In the UK, cryptocurrency is treated as a capital asset by the HM Revenue and Customs (HMRC), and yes, you may need to pay taxes depending on your activities. HMRC’s guidance on cryptoassets explains that there are two main taxes to consider: Capital Gains Tax (CGT) and Income Tax.
For Capital Gains Tax, you’ll pay if you make a profit when you sell, swap, spend, or gift crypto (except to your spouse). Everyone gets a tax-free allowance for CGT, which for the 2024/25 tax year is £3,000. If your total gains in a year are above this, you’ll pay CGT on the excess. The rate depends on your income tax bracket: 18% if you’re a basic rate taxpayer (income up to £50,270) or 24% if you’re a higher or additional rate taxpayer (income over £50,270).
For Income Tax, you’ll pay if you earn crypto through activities like mining, staking, or getting paid in crypto for work. These are treated as income, and you’ll pay based on your income tax band. There’s a tax-free personal allowance of £12,570. Read our guide on how to buy cryptocurrency in the UK.
Note: You need to keep detailed records of all your crypto transactions, like buy/sell dates, values in GBP, and wallet addresses, because HMRC might ask for them.
Capital vs. Income
Here’s a table showing what crypto transactions fall under Capital Gains Tax and what falls under Income Tax:
Capital Gains TaxIncome TaxSelling crypto for fiatEmployee remunerationSwapping cryptoMining rewardsSpending cryptoBountiesGifting crypto (unless it’s to your spouse)Staking rewardsSelling NFTsLending rewardsLiquidity mining rewards
When comparing the two, Capital Gains Tax applies to transactions where you’re disposing of your crypto and making a profit, like selling it for pounds, swapping one crypto for another, or even spending it to buy something. It’s all about the gain you make when you let go of the asset.
On the other hand, Income Tax kicks in when you’re earning crypto as a form of income, such as getting paid in crypto for a job, receiving mining rewards, or earning through staking or lending. The key difference is that CGT focuses on profits from selling or using your crypto, while Income Tax treats crypto you earn as part of your regular earnings.
Can HMRC Track Crypto?
Yes, HMRC can track cryptocurrency transactions in the UK, and they’ve got several ways to do it. Since crypto operates on public blockchains, every transaction is recorded on a transparent ledger.
HMRC uses advanced blockchain analysis tools, like those from Chainalysis, to trace funds from one wallet to another, even if users try to hide with mixers like Tornado Cash, which aren’t foolproof. They also request data from crypto exchanges, which follow Know Your Customer (KYC) rules, linking your identity to transactions.
For example, exchanges like Coinbase have shared user data for transactions over £5,000. HMRC’s Connect system pulls info from banks, international tax agreements, and even whistleblowers to spot undeclared crypto gains. Starting January 2026, the Crypto Asset Reporting Framework (CARF) will also make exchanges report user activity directly to HMRC, closing more loopholes. They can also investigate if you’re flagged for suspicious activity, like underreporting gains on your tax return.
Capital Gains Tax for Crypto in the UK
If you’re buying, selling, or doing anything with crypto that makes you a profit, you might need to pay this capital gains tax. The UK tax authority HMRC sees crypto like Bitcoin as an asset, not actual money. So when you make a profit by getting rid of your crypto, you’ll likely owe Capital Gains Tax or CGT.
