How HMRC Taxes Cryptocurrency in the UK
Cryptocurrency is not tax-free in the UK. HMRC first published crypto guidance in 2018 and has since expanded its position significantly. The core principle: cryptoassets are treated as capital assets for most individuals, meaning Capital Gains Tax applies when you dispose of them. HMRC now receives data from UK exchanges, making non-disclosure increasingly detectable.
- Disposing of cryptocurrency - selling, swapping, spending or gifting - triggers a potential CGT liability.
- The CGT annual exempt amount is 3,000 GBP for 2024-25 onwards. Gains above this threshold are taxable.
- CGT rates on crypto from October 2024: 18% for basic rate taxpayers, 24% for higher rate taxpayers.
- Report crypto gains via Self Assessment if total gains exceed 3,000 GBP or total disposal proceeds exceed 50,000 GBP.
What Counts as a Disposal?
HMRC guidance defines disposal as: selling crypto for fiat currency; exchanging one crypto for another; using crypto to pay for goods or services; gifting crypto (other than to a spouse or civil partner). Simply holding crypto does not trigger a liability.
Calculating Your Gain
Gain = disposal proceeds minus allowable cost. HMRC uses a Section 104 pooling method where you have made multiple purchases. Same-day and 30-day bed-and-breakfasting rules prevent artificial loss creation by using the repurchase cost when you sell and rebuy the same crypto within 30 days.
DeFi, Staking and Mining
Staking rewards may be treated as income or capital depending on the arrangement - HMRC guidance continues to evolve. Commercial mining is treated as a trade subject to Income Tax and National Insurance. DeFi lending in some protocols may constitute a disposal for CGT purposes in HMRC view.
Record Keeping
Keep records of all transactions including dates, GBP values at the time of transaction, wallet addresses and exchange records. Records should be kept for at least 4 years after the relevant tax year.
Frequently Asked Questions
Do I need to report crypto losses?
If total disposal proceeds exceed 50,000 GBP you must complete a Self Assessment return even with a loss. Reporting losses allows them to offset current or future gains - but losses must be reported within 4 years to be usable.
Does HMRC know about my crypto holdings?
HMRC has data sharing agreements with major UK exchanges and has issued nudge letters to known holders. Non-disclosure of taxable gains is increasingly detectable.
What CGT rates apply to crypto gains?
From October 2024: 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers on gains above the 3,000 GBP annual exempt amount. Rates changed in the October 2024 Autumn Budget.
Is crypto subject to Inheritance Tax?
Yes. Crypto holdings at death form part of the estate for IHT purposes, valued at the market rate on the date of death. Executors must include them in the IHT400 account.
