UK Cryptocurrency Tax Guide 2025
Cryptocurrencies have taken the UK by storm, and with growing adoption comes important tax responsibilities. Her Majesty’s Revenue & Customs (HMRC) treats cryptoassets as property or investments, not currency. This means UK individuals who buy, sell, or earn cryptocurrency may incur Capital Gains Tax (CGT) or Income Tax depending on the situation. Failing to report crypto gains can lead to penalties, so it’s crucial to understand your obligations.
This comprehensive guide explains how cryptocurrency is taxed in the UK under HMRC rules (updated as of 2025). We’ll cover everything from capital gains on trading crypto to income tax on staking rewards and airdrops, plus special scenarios like NFTs, DeFi transactions, lost or stolen crypto, and gifting. Throughout the guide, we use examples and step-by-step breakdowns to illustrate the calculations. We also highlight how Awaken.tax, a crypto tax software built for the web3 era, can help you accurately calculate and report your crypto taxes with ease.
Disclaimer: This guide is for informational purposes and reflects general HMRC guidelines as of 2025. Individual circumstances vary, so consider consulting a tax professional for personalized advice.
Crypto Tax Basics in the UK
Is crypto taxable in the UK? Yes – almost all cryptocurrency transactions can be taxable events. The UK does not view crypto as legal tender; instead, HMRC treats cryptoassets similarly to stocks or property. Two main types of tax could apply:
Capital Gains Tax (CGT) – when you dispose of crypto held as an investment (e.g., selling, trading, spending).
Income Tax – when you receive cryptocurrency (e.g., as salary, mining or staking rewards, airdrops for services).
What counts as a disposal? HMRC defines disposing of cryptoassets broadly. You trigger a taxable disposal whenever you:
Sell cryptocurrency for fiat money (e.g., converting Bitcoin to GBP).
Trade one crypto for another (crypto-to-crypto exchange).
Use crypto to purchase goods or services.
Give away crypto to someone else (except gifts to spouse or civil partner).
Note: Donating crypto to a registered charity is generally not subject to CGT.
When is Income Tax applied? Earning or receiving crypto can be income in scenarios such as:
Being paid in crypto by an employer or client.
Mining or staking cryptocurrency.
Earning interest or yield from lending crypto (including DeFi).
Receiving certain airdrops or bounty tokens if you performed work.
Not every crypto transaction is taxable: Buying crypto with fiat is not taxable, and merely transferring between wallets you control is not a disposal. Holding crypto itself doesn’t trigger tax – tax is only due when you dispose of assets or receive income.
Tax rates and allowances:
Capital Gains Tax Allowance: £6,000 for 2023–24, reduced to £3,000 for 2024–25. Only gains above this allowance are taxable.
CGT Rates: 18% for basic rate taxpayers and 24% for higher/additional rate taxpayers (applicable from late 2024 onward).
Income Tax Bands: Personal allowance £12,570. Beyond that, 20% (basic), 40% (higher), or 45% (additional) on income.
In summary: profit from selling or swapping crypto incurs CGT on gains above your allowance. Earned crypto incurs Income Tax on its value at receipt, and later CGT on any growth. Let’s break down each tax in detail.
Capital Gains Tax (CGT) on Cryptocurrency
Most casual investors deal with CGT. Whenever you dispose of crypto held as an investment, calculate a capital gain or loss for that transaction.
When do you pay CGT on crypto?
You trigger a CGT event when you dispose of a cryptoasset:
Selling for fiat.
Trading one coin for another.
Spending crypto on goods or services.
Gifting crypto (except to spouse).
Moving crypto between your own wallets is not a disposal. Gifts to spouse/civil partner are tax-free no-gain/no-loss transfers. Gifts to anyone else are disposals at market value. Donations to charity are exempt.
Example – Crypto-to-crypto trade: Alice trades 1 ETH (bought at £800) for 0.05 BTC when 1 ETH = £1,500. She disposes of ETH valued at £1,500, so her gain is £700.
Calculating capital gains on crypto
Convert to GBP: Use market value at disposal.
Determine cost basis: Purchase price plus fees, applying pooling rules for multiple acquisitions.
Compute gain or loss: Proceeds – Cost – Allowable Expenses.
Apply allowance and losses: Sum gains, subtract losses and allowance. Only net gains above the allowance are taxable.
Important note: If you paid Income Tax on crypto (e.g., mining income), use the value you were taxed on as cost basis to avoid double taxation.
Pooling and average cost basis
HMRC uses share pooling for identical assets:
All purchases of the same token merge into one pool.
Average cost per unit applies.
Special matching rules: same-day trades and “bed and breakfast” 30-day repurchases match separately to sales.
Example – CGT calculation with pooling: John’s BTC pool: 2 BTC cost £30,000. He sells 0.5 BTC worth £9,000. Cost basis = 0.5/2 × £30,000 = £7,500. Gain = £9,000 – £7,500 = £1,500. Under his £3,000 allowance, no tax due but record it. Pool now 1.5 BTC cost £22,500.
If sold at a loss, register losses by the self-assessment deadline to carry forward.
CGT reporting and deadlines
Tax year: 6 April to 5 April.
Report if: Net gains exceed allowance or total proceeds exceed £50,000, or if you are already registering for Self Assessment.
Deadlines: Online return by 31 January after year end. “Real-time” disposals reported within 60 days of disposal.
Income Tax on Cryptocurrency
Certain crypto transactions are treated as income rather than capital gains. Common scenarios:
Salary or freelance work paid in crypto.
Mining and staking rewards.
Airdrops or bounties for work.
DeFi yield or lending interest.
Referral or signup bonuses.
Not trading profits: Frequent trading profits are CGT, not Income Tax, unless you operate as a professional trading business.
Tax calculation on crypto income
Valuation: Fair market value in GBP at receipt.
Taxable amount: Added to other income, taxed at marginal rate.
National Insurance: May apply if employment or self-employment.
Allowances: £1,000 miscellaneous income allowance for casual mining/staking.
Expense deductions: If trading as a business, deduct allowable expenses.
Example – Mining income: Bob mines £1,800 of coins and has £200 of other misc income = £2,000. Above £1,000 allowance, he uses the allowance, pays tax on £1,000 at 20%. Later CGT on appreciation above £1,800.
Crypto received via employment: If paid £5,000 in crypto, it’s taxable income and cost basis for later CGT.
Awaken.tax tracks income transactions and prepares an income report.
Tax Treatment of Specific Crypto Transactions
Mining and Staking Rewards
Taxable as miscellaneous income when received, if a hobby (use £1,000 allowance).
Business mining/staking: Treat as trading income; deduct expenses.
Recognition: When rewards are credited under your control.
Example – Staking income: Jane earns 50 ADA worth £27 total. Under £1,000, no tax or reporting needed.
Airdrops and Hard Forks
Airdrops:
Unsolicited, no work: No Income Tax at receipt; CGT on disposal with zero cost basis.
For work or conditions: Income Tax at receipt; that value is cost basis for CGT.
Example – Airdrop, no strings: Receive tokens worth £500, no income tax. Sell for £600 → £600 CGT gain.
Hard forks:
No Income Tax at fork.
Split original cost between original and forked coins by relative values.
Separate pools for each.
Example – Hard fork: Own 2 ABC cost £500, fork gives 2 XYZ worth £100. Allocate £400 to ABC, £100 to XYZ.
Awaken.tax flags airdrops and allows cost-basis adjustments for forks.
Non-Fungible Tokens (NFTs)
Collectors: CGT on gains; no pooling, track each NFT separately.
Creators: Income Tax on profits from minting and sales.
Royalties: Income when received.
Example – NFT flip: Buy for £750, sell for £2,400 minus £100 fees → £1,550 CGT gain.
Awaken.tax imports NFT trades and tracks individual token costs.
Decentralized Finance (DeFi) Transactions
Complex DeFi activities often trigger multiple taxable events:
Lending & LP tokens: Exchanging assets for pool tokens triggers CGT on deposits and withdrawals.
Supply & yield: Yield rewards taxable as Income Tax when received and CGT on token growth.
Borrowing: Locking collateral may or may not trigger disposal depending on receipt of a new token.
Example – Lending disposal: Deposit 1 ETH (cost £1,200) when ETH = £2,000 → £800 CGT gain. Withdraw ETH at £2,500 → £500 CGT gain.
Awaken.tax supports 10,000+ protocols to classify and calculate each event.
Lost or Stolen Crypto
Loss or theft is not a disposal by default; you still own the asset on-chain.
Negligible value claim: Treat asset as sold for £0 to crystallize a loss.
Example – Lost key: 0.5 BTC cost £5,000; lost access; claim negligible value to record £5,000 loss.
Awaken.tax records holdings for potential negligible value claims.
Gifting Crypto and Inheritance
To spouse/civil partner: No CGT (no gain/no loss), retains original cost basis.
To others: Disposal at market value by giver; recipient’s cost basis equals gift value.
To charity: Exempt from CGT.
Inheritance: No immediate CGT; cost basis stepped up to market value at death; may incur Inheritance Tax.
Example – Gift to spouse: Transfer Litecoin cost £2,000, now £10,000 value; no CGT. Spouse sells for £10,000 under her allowance.
Awaken.tax lets you classify gifts and set cost bases.
How Awaken.tax Can Help with Crypto Taxes
Awaken.tax simplifies crypto tax compliance with features:
Automatic transaction import from exchanges and blockchains, including DeFi and NFTs.
Intelligent classification of trades, transfers, income, and DeFi events.
Accurate cost basis & CGT calculation with HMRC pooling and matching rules.
Income recognition for staking, airdrops, mining, and yield.
DeFi & NFT support for liquidity pools, yield farms, and unique tokens.
Tax reports: Detailed CGT computations and income summaries.
Fee tracking: Includes exchange and network fees in calculations.
Audit-ready records: Detailed logs for HMRC inquiries.
User-friendly review and custom edits to classifications.
Tax-loss harvesting insights and year-end planning tools.
Security & privacy with encrypted data and read-only API usage.
Customer support for complex scenarios.
With Awaken.tax, you stay compliant, minimize errors, and focus on investing while the software handles the heavy lifting.
Frequently Asked Questions (FAQs)
Do I owe tax if I trade crypto-to-crypto? Yes, crypto-to-crypto trades are taxable disposals.
Is holding crypto taxed? No tax on holding; tax triggers on disposals or income events.
Do I report gains under the allowance? You may still need to report if proceeds exceed £50,000 or you file otherwise.
Do I report small mining/staking income? Under £1,000 of miscellaneous income is tax-free and often unreported.
If I paid Income Tax on crypto, do I pay CGT? Yes, on appreciation beyond the income value only.
Any tax-free crypto transactions? Transfers between your wallets, spousal gifts, charity donations, unsolicited airdrops, and purchases with fiat.
Can I deduct crypto losses? Yes, losses offset gains; report losses to HMRC to carry forward.
Can I claim theft losses? Not directly; use negligible value claims for irretrievable losses.
Do wallet transfers need recording? Yes for records, but not taxable.
Will HMRC know my crypto? They obtain exchange data and use blockchain analysis; always report accurately.
Do I list every trade on tax return? No, submit totals; keep detailed computations for HMRC.
Is this guide up to date for 2025? Yes, includes recent CGT rate changes and HMRC guidance.
Final tip: Stay organized and start early. Use Awaken.tax to track your activity year-round and make smart tax planning decisions. Good luck, and happy investing!
