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This article explains how cryptocurrency is taxed in the UK for the 2025–2026 tax year, based on HMRC’s current guidance.
It covers:
- When crypto is taxed under Capital Gains Tax
- When it is taxed as income
- What HMRC considers a taxable “disposal”
The explanations are written for UK resident individuals who hold or use crypto personally. Companies and corporate structures are not covered. The focus is on understanding HMRC’s rules, not on giving personalised tax advice.
How HMRC Views Cryptocurrency
HMRC does not treat cryptocurrency as money.
Instead, it treats crypto as a type of asset. In practice, HMRC usually sees it as similar to an investment, such as shares, although the rules are not identical.
The key point is this:
Tax is based on what you do with your crypto, not simply on whether the price goes up or down.
You are not taxed just for holding crypto. Tax usually arises when something happens to it.
Capital Gains Tax
When Capital Gains Tax Applies
Capital Gains Tax (CGT) normally applies when you dispose of crypto and make a gain.
A disposal includes:
- Selling crypto for pounds (or another fiat currency)
- Exchanging one cryptocurrency for another
- Using crypto to pay for goods or services
- Giving crypto away to someone other than your spouse or civil partner
A common misunderstanding is thinking tax only applies when money is withdrawn to a bank account. That is not how HMRC works.
If you swap Bitcoin for Ethereum, for example, HMRC treats that as if you sold the Bitcoin for pounds and then bought Ethereum. That means a taxable event has occurred.
How Capital Gains Are Worked Out
In simple terms, a capital gain is:
Everything must be calculated in pounds sterling, using the value at the time of each transaction.
If you bought the same crypto multiple times at different prices, HMRC requires you to pool those purchases together and work out an average cost. There are also specific matching rules for same-day and short-term transactions. These details matter, but the core idea is that HMRC wants a consistent method, not cherry-picking prices.
The Capital Gains Allowance (2025–2026)
For the 2025–2026 tax year, individuals have a Capital Gains Tax allowance of £3,000.
- If your total gains for the year are £3,000 or less, no CGT is due
- If they are higher, only the amount above £3,000 is taxed
The allowance applies to all capital gains combined, not just crypto.
Capital Gains Tax Rates
For the 2025–2026 tax year, crypto gains use the settled CGT rates for other assets:
- 18% to the extent gains fall within your unused basic rate band.
- 24% for gains above that band.
Capital Gains Example
Assumptions: UK resident, Basic rate taxpayer, No other gains.
What happened
- Bought 1 Bitcoin for £20,000
- Later sold it for £35,000
- Paid £200 in exchange fees
Calculation
- Sale value: £35,000
- Purchase cost: £20,000
- Fees: £200
Income Tax and Crypto
When Income Tax Applies
Income Tax applies when you receive crypto, rather than when you sell it.
This can happen in several situations, including:
- Mining rewards
- Staking rewards
- Being paid in crypto for work or services
- Certain airdrops
- Some DeFi reward mechanisms
The key question HMRC asks is why you received the crypto. If it is received as a reward, payment, or return for doing something, HMRC will usually treat it as income.
Common Income Situations
In broad terms:
- Staking rewards are usually treated as income when received
- Mining can be income, whether as a hobby or as a business
- Being paid in crypto for work is taxed like being paid in cash
- Airdrops received for doing nothing are often not taxed at receipt
- Airdrops received in return for an action or service are more likely to be income
The facts matter. Two people receiving the same tokens can be taxed differently depending on circumstances.
How Income Is Taxed
If crypto is taxed as income:
- You are taxed on its pound value at the time you receive it
- That value then becomes the “starting cost” if you later sell the crypto
Income tax rates are the same as for other income:
- 20% (basic rate)
- 40% (higher rate)
- 45% (additional rate)
In some situations, National Insurance may also apply.
If your total "Miscellaneous Income" (including staking and airdrops) is under £1,000, it may be covered by the Trading Allowance and not require reporting, provided you have no other self-employment income.
Income Tax Example (Staking)
Assumptions: Higher-rate taxpayer.
What happened
Over the year, staking rewards were received with a total value at receipt of £2,000.
Tax Calculation
£2,000 × 40% = £800 Income Tax
If those tokens are later sold, Capital Gains Tax is calculated separately using £2,000 as the cost basis.
What Counts as a Disposal
Events That Are Taxable
HMRC treats the following as disposals:
- •Selling crypto for fiat
- •Swapping one crypto for another
- •Spending crypto
- •Gifting crypto (except to spouse/civil partner)
Each is treated as if the crypto was sold at its market value in pounds.
Events That Are Not Disposals
The following are not taxable disposals:
- ✓Buying crypto with pounds
- ✓Moving crypto between your own wallets
- ✓Simply holding crypto
- ✓Gifting crypto to a spouse or civil partner
Transfers between spouses usually take place on a “no gain, no loss” basis.
Common Areas of Confusion
- “I didn’t cash out, so there’s no tax”
- This is incorrect. Swapping tokens or spending crypto can still create a tax bill.
- “The amounts were small, so they don’t count”
- They still count. Even if no tax is ultimately due, HMRC expects disposals to be recorded.
- DeFi and complex arrangements
- Some DeFi activities are not fully spelled out in legislation. HMRC generally applies existing tax principles. In these cases, the correct treatment depends on the specific facts.
HMRC Oversight
HMRC actively monitors crypto activity. It receives information from exchanges and compares it with Self Assessment returns. Where discrepancies appear, HMRC may ask for clarification, issue assessments, or charge interest and penalties.
Summary
- Crypto is taxed in the UK mainly under Capital Gains Tax and Income Tax
- Selling, swapping, spending, or gifting crypto can trigger CGT
- Receiving crypto as a reward or payment can trigger Income Tax
- All calculations must be done in pounds at the time of each transaction
- The Capital Gains allowance for 2025–2026 is £3,000
- Tax treatment depends on facts and circumstances
Nothing involving crypto should be assumed to be tax-free unless HMRC clearly states that it is.