Crypto Taxes in the UK for 2026

Yes, cryptocurrencies like Bitcoin and others are subject to tax liability in the UK. According to His/Her Majesty’s Revenue and Customs (HMRC) Cryptoassets Manual, crypto assets are considered property rather than currency, and Capital Gains Tax (CGT) and Income Tax apply:

• Capital Gains Tax (CGT): Pertains to the profit made from selling crypto, as well as exchanging, trading, and gifting it.
• Income Tax: Applies to individuals receiving income in crypto or obtaining it through the process of mining, transaction confirmation, staking, and some airdrops.

Crypto tax liability in the UK is only triggered when crypto assets are disposed of or received. So, simply holding cryptocurrency is not subject to tax.

Disposing of a crypto asset for a profit is subject to Capital Gains Tax (CGT) in the UK. That includes selling crypto for pounds, exchanging it for a different cryptocurrency at a profit, gifting it, or spending it to buy products and services. The tax applies solely to the gain rather than the full disposal proceeds.

The Annual Exempt Amount

The Capital Gains tax-free allowance is £3,000 for individuals and £1,500 for trusts. The CGT Annual Exempt Amount has dropped significantly in recent years, from £12,300 in 2022/23 to £6,000 in 2023/24, and then to £3,000 in 2024/25, which is the current annual tax-free allowance for individuals. Asset-related gains that stay under the annual exempt amount limit are not taxed. However, these don’t only include crypto gains but also combined asset profits.

Capital Gains Tax Rates for Cryptoassets

For the 2025/26 tax year, Capital Gains tax rates are 18% for gains classified as basic-rate and 24% for higher- and additional-rate gains, as determined by the Income Tax band:

• Personal Allowance: When taxable personal income is up to £12,570
• Basic Rate: For taxable income between £12,571 and £50,270
• Higher Rate: Taxable income range of £50,271 to £125,140
• Additional Rate: Applies to taxable income over £125,140

When determining the UK Capital Gains Tax rate, all taxable gains, including crypto asset profits, are added on top of the taxable income to calculate how much of a person’s basic-rate Income Tax band remains. That means, depending on the taxable profits made, the capital gain can be split between the basic rate of 18% and the higher rate of 24%.

Worked Example for Crypto Capital Gain

John bought 1 BTC in February 2022 for £30,000 and sold it for £50,000 in February 2026. His gain was £20,000 (£50,000 minus £30,000). John hasn’t reported any other capital gains. After deducting the Annual Exempt Amount of £3,000, John’s taxable capital gain is £17,000 (£20,000 minus £3,000). At the 18% CGT rate, assuming John is a basic-rate taxpayer after adding the capital gain, he owes £3,060 in CGT.

When receiving crypto as personal income or earnings, individuals are required to pay Income Tax. The tax is calculated on the corresponding crypto value in GBP at the moment the payment was received. In the instances below, crypto transactions are subject not to Capital Gains but to Income Tax:

• Mining: According to HMRC’s CRYPTO40200 manual, income resulting from crypto mining, i.e., verifying blockchain additions in return for crypto assets, can be subject to Income Tax depending on four factors: the degree of activity, organization, risk, and commerciality. That means mining as a hobby using a home computer doesn’t normally constitute a trade. In contrast, using a dedicated rig with the specific goal of mining tokens for profit is considered a taxable event.
• Staking Rewards: As per the CRYPTO40250 crypto-assets manual, HMRC’s stance on crypto staking, i.e., exchanging tokens for Proof-of-Stake network validation entitlement, is that it is taxable income, particularly when the level of activity, organization, risk, and commerciality “amounts to a trade.”
• Airdrops: HMRC states that Income Tax may not always apply to airdrops, i.e., receiving tokens as part of marketing campaigns. According to the CRYPTO21250, Airdrop-related income may not be subject to tax treatment if individuals receive it without doing anything in return or without engaging in a business relationship. In contrast, airdrops provided in return for a service are taxed either as miscellaneous income or receipts of an existing trade.
• Crypto as Employment Income: When an individual’s salary is paid in crypto, it is fully subject to Income Tax as if received in pounds at the time of the transaction.

At the time of review, when paying Income Tax in England, Wales, and Northern Ireland, taxable income bands and rates are as follows:

• Personal Allowance (0%): up to £12,570
• Basic Rate (20%): £12,571 to £50,270
• Higher Rate (40%): £50,271 to £125,140
• Additional Rate (45%): Over £125,140

Please note that Scottish Income Tax bands and rates differ from the ones above.

The share pooling system, also known as Section 104 pooling, allows HMRC to calculate the allowable cost of disposed crypto assets using a pooled acquisition cost. It is a practical method that takes into account the difference in price of the same crypto asset acquired by investors at different periods of time.

The Section 104 pool is the final of three matching rules applied sequentially to each crypto asset, meaning cryptocurrency gains, such as from Ethereum and others, are considered under independent Section 104 pools. The three matching HMRC rules for calculating crypto gains are:

• Same-Day Rule: Before further matching happens, crypto asset disposals are matched against acquisitions made on the same day and don’t go into the Section 104 pool.
• Bed and Breakfasting Rule: When a crypto asset disposal cannot be matched using the same-day method, excess tokens will be considered under the 30-day bed and breakfasting rule. Under this rule, crypto assets are matched against acquisitions made within a 30-day period after the disposal.
• Section 104 Pool: Only when disposals are unmatched under the first and second rules are Section 104 pool calculations applied. Under the Section 104 pooling system, disposals are matched against the pooled allowable cost (pooled average) associated with them, with the allowable cost changing depending on the quantity of tokens acquired and disposed of.

Below is a Section 104 pool calculation, with a similar example provided in the CRYPTO22251 HMRC manual:

1. Susan buys 3 ETH for £6,000 in January 2024 and then another 2 ETH for £5,000 in March 2024.
2. Susan’s Section 104 pool contains 5 ETH at a total cost of £11,000, meaning the average cost per ETH is £2,200.
3. In December 2024, Susan sells 2 ETH for £5,000.
4. After disposal, Susan’s Section 104 pool contains 3 ETH with a remaining allowable cost of £6,600 and a pooled average cost of £2,200 per ETH.
5. Susan’s gain is £600 (£5,000 minus £4,400).

While software tools and crypto tax calculators are available to streamline calculations, understanding share pooling complements their functionality and helps the reader double-check the results provided rather than accept them at face value.

With reporting systems increasingly becoming more coordinated internationally, the amount of tax-related data authorities share is increasing, too. The Crypto-Asset Reporting Framework (CARF) and the EU’s DAC8 directive are two standards that UK crypto asset holders should be familiar with, as they outline the reporting obligations for crypto-asset service providers, such as crypto exchanges, requiring them to report transaction data to tax authorities.

As the global framework for crypto-asset service providers, CARF is a regulatory standard developed by the OECD, facilitating the automatic annual exchange of information regarding crypto transactions, with the UK committed to implementing the global standard.

The EU’s DAC8 directive standardizes tax reporting requirements across EU members. While the UK is not an EU member state, EU-based exchanges will automatically share information with national tax authorities, reporting relevant tax data pertinent to UK platform users.

In practice, UK crypto-asset holders should know that crypto transactions are not invisible, and tax authorities, such as HMRC, while still prioritizing self-reporting, don’t rely solely on it. Instead, they have access to transaction data via international reporting schemes and sharing agreements, increasing transparency and enforcing capabilities.

Yes. HMRC has growing access to crypto transaction data in the UK. Rather than relying on a single system, it combines information from multiple sources and benefits from data shared through many global reporting standards.

Specifically, HMRC has the legal power to request that crypto exchanges, such as Coinbase and Binance, share UK customer data for compliance purposes.

Similarly, analysis of public blockchains, where addresses can be linked to users and transaction flows traced, enables HMRC to use data and analytical tools to cross-reference the KYC verification mandated by crypto exchanges with blockchain identities, for instance.

Lastly, CARF implementation ensures that crypto exchanges share customer transaction data with HMRC for compliance purposes, thus tackling tax evasion for transactions above the reporting threshold.

While this information may be interpreted as alarmist, that is not our goal. Instead, we are looking to objectively inform readers of the HMRC’s tracking capabilities now and in the near future, helping them make educated decisions regarding their tax obligations.

The Self-Assessment tax returns system is the official tax reporting method in the UK. Individuals who disposed of crypto assets and whose gains exceeded the Capital Gains Tax Annual Exempt Amount, and persons who received crypto income taxable under Income Tax rules, must complete the self-assessment tax return form after the tax year ends on 5 April.

Even crypto-asset holders whose disposals are under the tax-exempt threshold may still be required to register in the Self-Assessment system if they haven’t done that before. Below is a step-by-step breakdown of the self-reporting process:

Register for Self-Assessment

Before the 5th of October, you need to register if you are required to fill out the form for the first time and gross proceeds (total sales value) exceed £50,000, even if your net profit is under the £3,000 tax-free allowance.

Compile and Calculate Your Crypto Transaction History

Compile data pertaining to dates of acquisitions and disposals with corresponding GBP values at the time of each transaction, using HMRC’s record-keeping instructions as guidance. Crypto exchange transaction histories, while useful, don’t always contain information required by HMRC.

Complete the Main SA100 Form and Supplementary SA108

Complete your tax return by filling in the SA100 form for the main Self-Assessment tax return and the SA108 CGT summary for reporting crypto gains.

Submit Your Online Tax Return and Pay

Submit your Self-Assessment tax return by 31 January and pay any tax you owe. The second payment, when applicable, must be completed no later than 31 July.

Crypto taxes in the UK regulatory practice apply to different types of transactions. For instance, selling crypto for pounds and trading crypto for crypto are transactions typically subject to Capital Gains Tax, while staking rewards and mining are often classified as taxable income under Income Tax rules. We break down the tax rules that apply to the most common crypto income and gains-related events.

Selling Crypto for GBP

When individuals sell crypto for GBP, they owe Capital Gains Tax on the gain, calculated as the disposal proceeds minus the allowable cost under Section 104 pooling rules. As explained in HMRC’s CRYPTO22280 manual, transaction fees paid in tokens may reduce the taxable gain but should be considered as disposals themselves.

Trading Crypto for Crypto

Trading crypto for crypto, such as selling Ethereum for Bitcoin, also means individuals must pay CGT on the taxable gain with HMRC using the GBP market value of the crypto asset at the time each transaction was made. Crypto traders are often surprised to find this out, especially as no GBP is actually received during these transactions. As per CRYPTO22550, HMRC does not consider crypto assets as currency or money.

Spending Crypto on Goods or Services

As outlined in the CRYPTO22100 manual, using crypto to buy products and services is also considered a disposal under HMRC tax rules, so to ensure tax compliance, individuals must pay CGT on any taxable gain of the disposal, in this case, the difference between the cost basis and the GBP market value at the time of purchase. For example, a person buying a mobile phone with £600 worth of BTC at the time of the purchase has a £300 gain if the BTC was originally acquired for £300.

Transferring Crypto Between Your Own Wallets

Because there is no change of ownership when crypto is transferred between an individual’s own wallets, there are no Capital Gains Tax implications. Nevertheless, it is paramount to keep records of transfers to calculate the allowable cost later. Additionally, according to the CRYPTO22280 manual, any fees paid are considered a separate disposal.

Receiving Crypto as a Gift

When crypto is given as a gift, it is treated as a taxable event, as explained in HMRC’s CRYPTO22100 manual, with Capital Gains Tax applying to the taxable gain on the disposal at market value at the time of the transfer. Gifts to spouses or civil partners are not subject to CGT.

Staking and Mining Rewards

As per HMRC’s CRYPTO40200 and CRYPTO40250 manuals, the taxable income resulting from mining and staking rewards is subject to Income Tax rather than Capital Gains Tax. The cost basis is the market value of the rewards in GBP at the time they were received and is used as the CGT allowable cost for future disposals.

Airdrops and Hard Forks

In the CRYPTO22350 manual, HMRC categorizes airdrops as crypto assets that may trigger CGT when disposed of. However, in CRYPTO21250, the UK’s tax authority states that airdrops that are provided in return for a service are subject to Income Tax. So, the tax treatment depends on the circumstances.

DeFi Transactions

According to the CRYPTO61130 manual, DeFi transactions, such as lending and staking, may create taxable events either as trading income, subject to Income Tax for individuals or Corporation Tax for companies, when the activity is considered a trade. Alternatively, Capital Gains Tax consequences may arise when DeFi transactions are not classified as trade but result in disposals.

UK crypto asset holders can use several legal strategies to reduce their tax liability. It is important to note that the mechanisms described below are not loopholes or schemes to avoid Capital Gains Tax and Income Tax, but standard and accepted methods within the HMRC tax system.

• Use the Annual Exempt Amount: While the Annual Exempt Amount is relatively low, it might be useful to consider keeping gains under the threshold as much as possible, possibly by spreading disposals over calendar years.
• Offset Losses Against Gains: Because capital losses balance out the capital gains reported in the same tax year, they can be used to offset taxable gains.
• Spousal Transfers: Sending crypto assets to spouses or civil partners is exempt from CGT, so if the spouse is still within the Annual Exempt Amount, their own trading allowance can legally be used to reduce how much tax individuals pay.
• ISA Rule: While Individual Savings Accounts (ISAs) allow people to hold tax-free savings, it is not possible to keep crypto in an ISA. However, as per the Tax treatment of cryptoasset Exchange Traded Notes (cETNs) policy, cETNs are treated as regulated debt securities and can be held in ISAs, enjoying a tax-advantaged status.
• Record-Keeping: Keeping accurate records, particularly for share pooling, ensures there are no overstated gains that would result in higher tax exposure.

HMRC requires UK crypto holders to keep records for Income Tax and Capital Gains Tax purposes for a period of at least 5 years after the 31 January deadline for filing Self-Assessment for each tax year.

The records required should include the type of cryptoasset and number of units, as well as the date of acquisition and disposal, and the value of tokens in GBP at each transaction. Section 104 pool balances should also be recorded.

Crypto asset holders should also keep supporting documentation such as pound sterling bank statements, wallet addresses, exchange transaction history, and record crypto income payments in GBP value at the time of receipt.

While some of the tax-related information can be relatively easily kept and documented, that is not the case with DeFi activity, NFT trades, or cross-chain trades, acquisitions, and disposals. A crypto tax software tool often helps in compiling records, but they must be backed with traceable and verifiable data.

Managing UK crypto taxation requires an understanding of how HMRC categorizes digital assets as property. Whether your activities incur Capital Gains Tax at 18% or 24% or fall under Income Tax structures, proactive compliance is no longer optional. With the activation of international tracking standards like CARF, transaction transparency has fundamentally changed. Maintaining organized records and utilizing legal allowances remain your best strategies to optimize your tax position while ensuring full regulatory compliance.