Do I Need to Pay Tax on Crypto in the UK?
Whether you need to pay tax on your crypto will depend on the nature of your activities and how much you make from them. We will discuss which activities are taxable below and whether they result in Capital Gains Tax or Income Tax.
Investing and Trading
Buying crypto is not taxed but Capital Gains Tax will apply whenever you “dispose” of your cryptocurrency, which could mean selling it, swapping it, spending it, or gifting it (except to a spouse).
Staking, Lending, and Other DeFi Activities
Profits from DeFi activities such as lending and staking will be subject to Capital Gains Tax if the return is considered capital, and Income Tax if the return is considered income.
A return is more likely to be considered income when it is paid periodically, has a pre-agreed amount, or is received for providing a service.
A return may have the nature of capital when these factors don’t apply and the return is uncertain and speculative. In this case, Capital Gains Tax will apply.
Getting Paid in Crypto
If you receive crypto in return for employment, you will need to pay Income Tax on it, as well as National Insurance.
Your employer is responsible for paying these costs. If you’re self-employed, you’ll need to pay the relevant sum yourself in pounds.
If you mine or validate a blockchain as a hobbyist rather than a business then any coins or tokens you receive will be subject to Income Tax. Capital Gains Tax will also apply when you dispose of any crypto you have mined.
If you mine as a business, you may instead be subject to Corporation Tax on profits, and chargeable gains when selling mined coins. See HMRC’s mining guidance for more info.
If you receive an airdrop in return for doing something, such as participating in a campaign or using a certain blockchain or app, it will be taxed as income. If, however, you receive an airdrop without doing anything in return, it is not subject to Income Tax.
Capital Gains Tax will also apply when you dispose of airdropped crypto.
Although there is no specific guidance on NFTs, they will be viewed in the same way as cryptocurrency so you will need to pay Capital Gains Tax when you dispose of them.
Additionally, if you buy an NFT with cryptocurrency, this counts as a disposal of your cryptocurrency and so would trigger Capital Gains Tax.
There are some expenses that are considered “allowable costs” and so can be deducted from your gains before Capital Gains Tax is applied. According to HMRC, these are:
Transaction fees paid before the transaction is added to a blockchain
Some exchange fees
Advertising for a buyer or seller
Drawing up a contract for the transaction
Making a valuation so you can work out your gain for that transaction
HMRC does not consider mining expenses such as equipment or electricity to be allowable costs for Capital Gains, but if you mine as a business activity, you may be able to deduct your costs as expenses.
Check out the “Mining Guidance” page in our HMRC Links section below for more information.
How Much Tax Do I Need to Pay?
How much tax you pay in the UK depends on your income. The tax rates are detailed below.
Capital Gains Tax
The first £12,300 of capital gains you make during each tax year is tax-free, no matter what.
Any gains you make above that amount will be taxed at one of the following rates according to the size of your income.
Taxable Income Capital Gains Tax Rate
Up to £50,270 10%
Over £50,270 20%
If you generated income from crypto, you will need to add this to any other income you made during the tax year to find which rates apply to you.
Taxable Income Income Tax Rate
Up to £12,570 0%
£12,571 to £50,270 20%
£50,271 to £150,000 40%
Over £150,000 45%
How Do I Calculate My Taxes?
You can calculate how much tax you will need to pay by keeping track of how much income and capital gains you make throughout the tax year and seeing which of the tax bands above you fall into.
The easiest way to do this is with the aid of tax software. You simply sync the software with your exchanges and wallets, and it will do all the tricky calculations required for pooling (the cost basis method used by HMRC). Getting this right is important if you want to avoid a fine for misreporting.
Exchanges may sometimes lose or delete users’ data but tax software automatically updates and stores all the records you need. If, however, you decide to keep records manually, HMRC requires you to record the following information for every transaction you make.
Date of transaction
Number of tokens
Whether they were bought or sold
Value of the tokens in GBP
Pooled costs of each cryptocurrency before and after disposals
Bank statements and wallet addresses
CoinTracker is our top choice for calculating your crypto and NFT taxes. Its clear layout makes it easy to see your portfolio allocation and investment performance in real time, while CoinTracker’s cost basis optimisation and tax-loss harvesting tools will help you save money year-round.
Koinly makes it simple to import your trades, track your portfolio, and generate tax reports. With over 300 wallets and exchanges supported and a variety of price tiers available—including a free version—Koinly is popular with a wide range of crypto traders and investors.
TokenTax provides a full suite of crypto tax services, with access to teams of experts and deep industry knowledge as well as their tax accounting software. There are different plans to suit hobbyists and professionals, with a tax-loss harvesting dashboard and all the tax forms you need.
How to Pay Crypto Taxes in the UK
You can follow these simple steps to ensure you pay the correct amount of tax and avoid a fine. The tax year in the UK is from 6 April to 5 April the following year. Each year, you will need to submit a tax return for the previous tax year.
Keep accurate records. Record the necessary information for all your transactions throughout the tax year, or simply use one of the tax software providers above to do this for you.
Register for Self Assessment. If you didn’t send a tax return last year, you will need to register for Self Assessment by the deadline on 5 October.
Complete your tax return. Fill in your Self Assessment tax return (SA100) and the supplementary capital gains section (SA108) if required. You can save time by using tax software to generate a tax report for you.
Submit your tax return. If you are sending a paper return by post, you will need to do this by 31 October. Alternatively, you can complete your tax return online by the deadline on 31 January.
Pay your taxes. Check your tax bill in your online account to find out what you owe (or you will receive a bill by post if you submitted a paper return). Pay your bill by 31 January.