Cryptocurrency trading has evolved into a recognised and regulated aspect of the investment landscape. With growing participation from both individual traders and institutions, HMRC has significantly increased its focus on the taxation of cryptoassets.
For active traders, this brings a range of complex tax reporting obligations. Activities such as trading between cryptocurrencies, using decentralised finance (DeFi) platforms, or receiving tokens through staking, mining, or airdrops can all trigger taxable events, even without converting crypto back to fiat currency.
UK taxpayers have a legal duty to declare crypto-related gains and income accurately. With HMRC expanding its data-sharing agreements and transaction-tracing capabilities, the risk of penalties, interest charges, and retrospective investigations has never been higher.
UK cryptocurrency tax guide 2025: What every trader needs to know.
This guide, prepared by Digital Accounting in Bicester, provides essential information on how UK tax law applies to cryptocurrency trading activity. You will:
- Understand how cryptocurrency trading activity is taxed in the UK
- Learn how HMRC classifies and treats different types of transactions, including trading, staking, airdrops, and DeFi activity
- Identify what constitutes a taxable event and when Capital Gains Tax or Income Tax applies
- Keep up with HMRC’s evolving compliance requirements and reporting obligations
- Learn about legitimate tax strategies to reduce liability and avoid penalties
- Help you decide when to seek professional advice or support with tax calculations and self-assessment filing
Paying tax on cryptocurrency in the UK
Cryptocurrency is fully taxable in the UK. While digital assets such as Bitcoin and Ethereum are not recognised as currency by UK financial institutions, HMRC treats them as property and they are taxed in line with existing rules for investments. For most individuals, this means paying either Capital Gains Tax (CGT) or Income Tax, depending on how the crypto is acquired and used.
If you dispose of crypto, for example, by selling it, swapping it for another token, or spending it- you may realise a capital gain. This gain is subject to CGT if it exceeds the annual tax-free allowance. As of the 2024–2025 financial year, Capital Gains Tax allowance has been reduced to £3,000, down from £12,300 in 2022–2023. This significant reduction means more crypto investors are now likely to fall within the scope of CGT.
Additionally, from 30 October 2024, updated CGT rates apply:
- 18% for basic rate taxpayers
- 24% for higher and additional rate taxpayers
Crypto received through mining, staking, airdrops, or as payment for services is generally treated as income and taxed under Income Tax rules. The amount of tax payable depends on your total income for the year, with rates ranging from 20% to 45%, in line with standard income tax bands.
HMRC has been clear in its guidance that crypto transactions are taxable, and it now has enhanced powers to access data from exchanges and digital platforms. As such, understanding how your crypto activity is taxed and ensuring accurate reporting- is essential for every UK- based trader.
What is a taxable event in cryptocurrency?
Understanding what triggers a tax liability is essential for any cryptocurrency trader. In the UK, HMRC considers certain actions involving cryptoassets to be ‘disposals’ or income-generating events, and these are referred to as taxable events. The tax you pay depends on the nature of the transaction (it may fall under Capital Gains Tax or Income Tax).
Taxable events subject to Capital Gains Tax (CGT)
You may be liable for Capital Gains Tax when you dispose of a cryptoasset, which includes:
- Selling crypto for fiat currency (e.g. GBP)
- Exchanging one cryptocurrency for another (e.g. BTC to ETH)
- Using crypto to pay for goods or services
- Gifting crypto to anyone other than a spouse or civil partner
In each case, you are required to calculate the gain or loss made from the disposal and report it if your total gains exceed the annual allowance.
Taxable events subject to Income Tax
Some types of crypto activity are considered to generate income and may be taxed under Income Tax rules. These include:
- Receiving crypto through mining or staking
- Earning crypto via airdrops (in return for an action or service)
- Being paid in cryptocurrency for work or services
- Earning rewards from DeFi platforms
In these cases, the income is valued at its fair market value in GBP at the time it is received and must be included on your Self-Assessment tax return.
How to calculate a capital gain or loss
To determine your tax liability when disposing of cryptocurrency, you first need to calculate your capital gain or loss. This begins by establishing your cost basis– the original value of the asset at acquisition. For most crypto purchases, the cost basis is the amount paid in GBP, including any associated transaction fees. If the crypto was acquired through non-purchase methods, such as mining, staking, or airdrops, the cost basis is the fair market value in GBP at the time of receipt.
Once the cost basis is known, your capital gain or loss is calculated by subtracting it from the value at the point of disposal. This disposal could include selling crypto for fiat, trading it for another token, spending it, or gifting it (outside of spousal transfers). A positive difference results in a capital gain, while a negative difference creates a capital loss, which can be used to offset future gains.
In the UK, HMRC requires the use of Section 104 pooling rules, also applied to traditional share trading. Rather than track individual units, each type of cryptoasset is grouped into a ‘pool’ with a pooled allowable cost. This average cost basis is adjusted each time additional units are acquired.
To prevent tax loss manipulation, HMRC applies matching rules in the following order:
- Same day rule– disposals are first matched with acquisitions made on the same day.
- Bed and breakfast rule– if unmatched, disposals are next matched with acquisitions made within the following 30 days.
- Section 104 pool– any remaining disposals are matched against the pooled holdings.
Are you feeling overwhelmed by crypto tax calculations? From establishing your cost basis to applying Section 104 pooling, Digital Accounting takes the complexity out of crypto tax reporting. Get in touch and let us support you.
What to do with crypto losses?
If you’ve sold cryptocurrency at a loss, it may still offer tax planning value. Under UK tax rules, capital losses can be used to offset gains from other crypto disposals or investments, effectively reducing your Capital Gains Tax liability. While losses are not taxed, correctly reporting them ensures you can make full use of them, either in the current tax year or in the future.
Losses can be used in the same tax year to bring your gains down to the annual CGT allowance (£3,000 for 2025/26). If you don’t use them immediately, you can carry them forward indefinitely, but only if they are correctly reported to HMRC.
How to carry forward crypto losses
To preserve your right to use losses in future years, you must:
- Report them on your Self-Assessment tax return in the year the loss occurred
- If you don’t file a tax return, you must notify HMRC in writing
- HMRC allows up to four years to register a loss- after that, the opportunity is lost
Even if your gains are currently below the reporting threshold, it’s still wise to register any losses now so they are available when you need them.
Digital Accounting team can help you identify, record and report crypto losses to ensure you remain compliant and make the most of every tax-saving opportunity in the future.
How to calculate crypto income
To calculate your crypto income, you must determine the fair market value of each reward or payment in GBP on the date it was received. This value is added to your total taxable income for the year and taxed according to the UK’s progressive Income Tax bands:
- 0% on income up to £12,570
- 20% on income between £12,571 and £50,270
- 40% on income up to £125,140
- 45% on income over £125,140
If your total income exceeds £100,000, your personal allowance is gradually reduced and eliminated completely at £125,140.
For traders with frequent or high-volume crypto income, such as regular staking rewards, airdrops, or play-to-earn activity, calculating and reporting the correct values can be time-consuming and complex. Each transaction must be valued accurately in GBP on the date it was received and classified correctly for tax purposes. Digital Accounting team can handle this for you- from reviewing your transaction history and identifying income to calculating your tax position and preparing your return- ensuring everything is accurate, compliant and submitted on time.
Which crypto transactions are tax-free?
Not all crypto activity results in a tax liability. In the UK, several types of transactions are considered tax-free by HMRC. These include:
- Buying cryptocurrency with fiat currency (e.g. GBP)
- Holding (HODLing) crypto without disposing of it
- Transferring crypto between your own wallets or exchange accounts
- Gifting crypto to a spouse or civil partner
- Donating crypto to a registered charity
While these transactions don’t trigger tax, it’s still important to keep accurate records, especially for future disposals where gains or losses may arise.
Strategies to reduce your crypto tax bill
There are several legitimate strategies that can help reduce your tax liability. These approaches are particularly relevant for traders and investors looking to manage their exposure efficiently:
- Use your tax-free allowances– take advantage of the Capital Gains Tax allowance (£3,000 for 2025/26) and the Trading Allowance (£1,000 for miscellaneous or trading income). Gains or income within these thresholds are tax-free.
- Gift crypto to your spouse or civil partner– transfers between spouses or civil partners are exempt from tax. This allows you to effectively double your allowances by realising gains under both individuals’ thresholds.
- Time disposals strategically– if your income is lower in a particular tax year, consider realising gains during that period to benefit from lower tax rates. Alternatively, you can delay disposals until a future year if it places you in a lower income bracket.
- Harvest losses to offset gains– selling underperforming crypto assets can generate capital losses, which can be used to offset gains in the same year or carried forward to reduce future tax bills.
- Donate crypto to charity– donating to a qualifying UK charity can be free from Capital Gains Tax, and in some cases may provide Income Tax relief as well
Reporting Cryptocurrency to HMRC
If you have earned income or realised gains from cryptocurrency, you are legally required to report this to HMRC through the Self-Assessment tax return. Reporting obligations also apply regardless of whether a profit or loss was made. If the total value of your crypto disposals- including sales, crypto-to-crypto exchanges, and gifts- exceeds £50,000 within a tax year, you must report this to HMRC, even if no gains have been realised. Every crypto-to-crypto transaction constitutes a taxable event under UK tax law, making regular traders and active investors particularly likely to meet reporting thresholds.
To report cryptocurrency activity, HMRC requires completion of two forms:
- SA100 – the main Self-Assessment Tax Return used to report income, including earnings from crypto.
- SA108 – the Capital Gains Summary form, used to declare gains or losses from disposals such as selling, swapping or gifting crypto assets.
You can file your return either online through the Government Gateway or by post. The deadline for postal returns is 31st October, while online returns must be submitted by 31st January following the end of the tax year. If you haven’t registered for Self-Assessment before, you must notify HMRC by 5 October.
It’s also important to note that HMRC places full responsibility on the individual to maintain detailed records of all cryptocurrency transactions. Relying solely on your exchange history is not sufficient. Keeping accurate records of your acquisitions, disposals, and the corresponding value in GBP is essential for calculating gains or losses and evidencing your tax position if required. Strong record-keeping is the foundation of effective and compliant crypto tax reporting.
The future of crypto tax reporting- what CARF means for UK traders
The Cryptoasset Reporting Framework (CARF) is a new international standard developed by the OECD to improve tax transparency around cryptoassets. It requires cryptoasset service providers to collect and report information about users’ transactions to tax authorities, who will then share this data with other participating countries’ tax agencies. The UK government has confirmed it will implement CARF from 1 January 2026, with the first exchanges of information expected in 2027.
In addition to international reporting, HMRC will also extend CARF to include domestic reporting, meaning UK-based platforms will report information on UK residents directly to HMRC. For UK crypto traders, this means significantly increased visibility of crypto activity, reinforcing the need for accurate record-keeping and full compliance with tax obligations.
Navigating cryptocurrency tax can be complex, especially with evolving HMRC regulations and reporting obligations. If you are a cryptocurrency trader and want to ensure you stay fully compliant while optimising your tax position, our expert team at Digital Accounting is here to help. Get in touch with us today to find out how we can assist you and help you stay ahead with confidence.
