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Cryptocurrency Tax

HMRC treats cryptocurrency (cryptoassets) as property for tax purposes, not as currency or a financial instrument. This means that transactions involving cryptoassets can give rise to Capital Gains Tax (CGT) when assets are disposed of, and Income Tax when income is received from certain activities. The UK tax year runs from 6 April to 5 April, and you must report crypto transactions on your Self Assessment return if you owe tax. HMRC has published detailed cryptoassets manual at CRYPTO2000 onwards, which provides the most current guidance.

CGT on Disposal

A disposal occurs when you sell crypto for fiat currency, exchange one crypto for another (e.g. Bitcoin for Ethereum), use crypto to pay for goods or services, or gift crypto (unless to a spouse or civil partner). Each disposal is a chargeable event for CGT purposes. The gain is the proceeds minus the allowable cost (acquisition cost plus transaction fees). The annual CGT exempt amount for 2025/26 is £3,000. Gains above this are taxed at 10% (basic rate) or 20% (higher rate). You must report disposals that exceed the annual exempt amount on your Self Assessment return using the Capital Gains summary pages. HMRC's guidance on share pooling treats cryptoassets under a "same-day" rule, a 30-day "bed and breakfasting" rule, and a Section 104 pool (a single pooled cost basis for all holdings of the same cryptoasset).

Income Tax on Mining and Staking

If you mine cryptoassets (transaction validation through proof of work) or stake cryptoassets (proof of stake validation), the value of the crypto received is generally treated as income and subject to Income Tax. For individuals acting as a business (regular, organised, commercial activity), the income is treated as trading income and Class 4 National Insurance may also apply. For casual, non-business activity, it is treated as miscellaneous income. Subsequent disposals of mined or staked crypto may also give rise to CGT, depending on whether the activity is a trade. If the mining/staking is a trade, the crypto is trading stock and only Income Tax applies; if not, both Income Tax (on receipt) and CGT (on disposal) may apply, with a cost basis equal to the market value at the time of receipt.

Record-Keeping Requirements

HMRC expects you to maintain detailed records of all crypto transactions, including: date of transaction, type of cryptoasset, number of units, value in GBP at the transaction time, transaction fees, exchange used, counterparty address (if relevant), and the purpose of the transaction (personal, business, mining, etc). Because crypto transactions can be very numerous (especially for DeFi users), specialist crypto tax software (such as Recap, Koinly, or Cointracking) is widely used to aggregate data from exchanges and wallets. HMRC has the power to request information from crypto exchanges under the OECD's Crypto-Asset Reporting Framework (CARF). You should keep records for at least six years after the relevant tax year.

DeFi and Lending

Decentralised Finance (DeFi) activities such as lending, borrowing, providing liquidity, and yield farming create complex tax positions. Lending crypto to a protocol typically involves a disposal for CGT purposes (because you lose control of the specific tokens). Rewards received from DeFi protocols (liquidity provider tokens, yield farming returns) are generally income. "Staking" on proof-of-stake blockchains (like Ethereum, Solana, Cardano) is treated similarly — rewards are income at the point of receipt. If you lend crypto and receive the same asset back, HMRC may treat this as a disposal and reacquisition. The tax treatment of DeFi is evolving, and HMRC released a consultation in 2024/25 on potential simplification for certain DeFi "staking" and "lending" transactions.

NFTs

Non-fungible tokens (NFTs) are treated as a type of cryptoasset for UK tax purposes. Buying and selling NFTs can give rise to CGT in the same way as fungible cryptoassets. Creating (minting) an NFT may be a taxable event — the initial sale of a minted NFT is likely income (trading or miscellaneous). Buying an NFT with crypto is a disposal of that crypto for CGT purposes, and the NFT itself is a new asset with a cost basis equal to the market value of the crypto at the time. Because each NFT is unique, there is no pooling — each NFT is a separate asset for CGT purposes. The £6,000 rule for chattels (tangible moveable property) does not apply to NFTs as they are intangible.

Airdrops

Airdrops (receiving free crypto tokens) are taxable when you gain control of the tokens. If the airdrop is linked to an existing holding (e.g. a governance token airdrop to existing protocol users), the market value at receipt is income. If the airdrop is genuinely unsolicited with no connection to any previous activity, it may be treated as a windfall and not taxable — though HMRC has not issued definitive guidance on this point. Subsequent airdrops that require action (e.g. claiming by interacting with a smart contract) are more clearly taxable. Airdrops distributed as part of a marketing or promotional campaign are likely taxable income for the recipient.

Share Pools and Identification Rules

For CGT purposes, HMRC applies the "share pooling" regime to fungible cryptoassets (like Bitcoin). This means all units of the same cryptoasset held in the same capacity are treated as a single "Section 104 pool" with an average cost basis. When you sell, the cost used is the average cost of the pool. There is also a "same-day" rule (disposals match acquisitions on the same day first) and a 30-day "bed and breakfasting" rule (if you sell and buy back within 30 days, the disposal is matched against the repurchase, not the pool). These rules mirror those for shares and make it harder to realise losses for tax purposes while maintaining exposure to the same asset.