Tax and cryptocurrencies: how HMRC taxes crypto
When you pay Capital Gains Tax or Income Tax on crypto in the UK, the £3,000 allowance and 18% or 24% rates, how to report it, and what to do if you owe tax.
PFC Accountants and Business Advisors
The short answer
Yes. In the UK, cryptocurrency is taxed like other assets. You usually pay Capital Gains Tax when you sell, swap, spend or give away crypto at a gain, and Income Tax when you receive it as income, for example from mining, staking or your employer. Gains above the £3,000 annual allowance are taxed at 18% or 24%, depending on your income.
Bitcoin, Ethereum and other cryptoassets are popular investments, but they’re largely unregulated and risky, and scams are common. This guide is about the tax, not whether to invest.
When you pay Capital Gains Tax
Most people who buy and sell crypto as an investment pay Capital Gains Tax. You make a disposal, and may owe tax, when you:
- sell crypto for pounds or another currency
- swap one cryptoasset for another, even if you never cash out to pounds
- use crypto to pay for goods or services
- give crypto away (except to your spouse, civil partner or a charity).
Simply buying and holding crypto isn’t a disposal, and moving tokens between your own wallets isn’t either.
How the gain is worked out
The gain is usually what you received, in pounds, minus what the tokens cost you. Because people buy the same token at different prices, HMRC uses pooling: each type of token goes into a pool with an average cost, and a share of that cost is deducted when you sell.
There are two exceptions. Tokens you buy on the same day as you sell, or within 30 days after selling, are matched with that sale first, not the pool. You can also deduct allowable costs such as transaction fees. Exchange reports are not tax calculations and don’t track pooled costs, so you need your own records.
Rates and the tax‑free allowance
| 2025/26 and 2026/27 | |
|---|---|
| Annual tax‑free allowance | £3,000 |
| Rate within the basic rate band | 18% |
| Rate above it (higher and additional rate) | 24% |
Losses on crypto can be set against gains, but only once you’ve reported them to HMRC, and you have four years from the end of the tax year to claim a loss. So it’s worth reporting losses even in a year you have nothing to pay.
When you pay Income Tax instead
- From your employer. Crypto paid as wages or a bonus is taxed as employment income, usually through PAYE, or through Self Assessment if your employer doesn’t deduct it.
- Mining, staking and lending. Tokens you receive are taxable income. If it isn’t a trade, it’s treated as other income: the first £1,000 of trading and miscellaneous income is covered by an allowance. Between £1,000 and £2,500 you need to tell HMRC; above £2,500 you need to register for Self Assessment.
If you later sell tokens you’ve already paid Income Tax on, Capital Gains Tax applies only to any rise in value since you received them.
How to report it
You report gains, losses and crypto income on your Self Assessment tax return, which has had its own cryptoasset section since the 2024/25 tax year, by 31 January after the end of the tax year. You must report if your total gains are above the £3,000 allowance. If you’re registered for Self Assessment, you must also report if you disposed of assets worth more than £50,000 in the year, even if your gains are within the allowance. Instead of waiting for your tax return, you can also report and pay through HMRC’s Capital Gains Tax real time service.
HMRC can see more than before
Since 1 January 2026, crypto exchanges and other cryptoasset service providers, in the UK and abroad, must collect details from their customers under the international Cryptoasset Reporting Framework, including your name, date of birth, address and National Insurance number or Unique Taxpayer Reference, and report them to HMRC. Not giving accurate details to a UK provider can mean a penalty of up to £300. HMRC has also been writing to people it believes have crypto gains to declare.
If you owe tax from earlier years
If you think you’ve underpaid, it’s far better to tell HMRC before it contacts you. Penalties are usually lower for an unprompted disclosure. HMRC has a dedicated Cryptoasset Disclosure Service: you work out the tax, interest and penalties, submit the disclosure online, and pay within 30 days.
How far back you go depends on why the tax wasn’t paid: generally 4 years (this year and the 3 before) if you took reasonable care, up to 6 years if you were careless, and up to 20 years if it was deliberate. This is where advice really pays, as getting the calculation and the penalty right affects whether HMRC accepts it.
Keep good records
- the type of token and the date of each transaction
- how many tokens you bought, sold or received, and how many you have left
- the value in pounds at the time
- your pooled cost before and after each disposal
- bank statements and exchange records.
How PFC can help
We can work out your gains using HMRC’s pooling rules, include crypto on your Self Assessment tax return, and, if you owe tax from earlier years, prepare and submit a voluntary disclosure for you. Book a free consultation to talk it through in confidence.
Common questions
Do I pay tax on crypto if I don’t cash out?
Possibly. Swapping one cryptoasset for another is a disposal for Capital Gains Tax, even if you never convert to pounds. Just holding crypto, or moving it between your own wallets, isn’t.
How much crypto can I sell tax‑free?
Your gains, not your sales, are what count. The first £3,000 of total gains in a tax year is tax‑free. If you’re registered for Self Assessment, you must still report if you disposed of assets worth more than £50,000 in the year.
What rate of tax do I pay on crypto gains?
Capital Gains Tax is 18% on gains that fall within your basic rate band and 24% above it, after the £3,000 allowance.
Is staking income taxable?
Yes. Tokens received from staking, mining or lending are taxed as income when you receive them. If you later sell them, Capital Gains Tax applies to any rise in value.
Can I claim a loss on crypto?
Yes. Losses can be set against your gains, but you need to report them to HMRC to use them, within four years of the end of the tax year.
What should I do if HMRC writes to me about crypto?
Don’t ignore it. Check what you’ve disposed of, work out any tax, and reply by the date given. If you may owe tax for earlier years, get advice before you respond.
Sources
- GOV.UK — Check if you need to pay tax when you sell cryptoassets (updated 5 October 2026)
- GOV.UK — Check if you need to pay tax when you receive cryptoassets
- GOV.UK — Capital Gains Tax rates and allowances
- GOV.UK — Capital Gains Tax summary notes 2025–26 (SA108)
- GOV.UK — Information you need to give to UK cryptoasset service providers
- GOV.UK — Tell HMRC about unpaid tax on cryptoassets
- HMRC — Cryptoassets Manual
- HMRC — Capital Gains Tax: reporting and losses
This article is general information, correct as at 25 October 2026. It isn’t advice for your circumstances, and tax rules change. Please speak to us before acting on it.
