Activity-Specific

NFT Taxation in the UK: Buying, Selling & Creating NFTs

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Non-Fungible Tokens (NFTs) are taxed in the UK using existing tax rules. There is no special or separate “NFT tax regime”. Instead, HMRC looks at what the NFT represents, how it is used, and how value is realised.

This guide explains how NFTs are taxed for UK resident individuals in the 2024–2025 tax year, covering buying and selling NFTs, creating digital art, creator income, royalties, Capital Gains Tax, and recent administrative changes that affect how NFT activity must be reported.

The aim is to explain HMRC’s approach clearly and accurately. This is not personalised tax advice.

How HMRC Views NFTs

HMRC treats NFTs as cryptoassets, but the tax treatment depends on the activity, not the technology.

In practice, HMRC asks:

Did you create something and receive payment?
Did you sell or exchange an asset you owned?
Did you receive ongoing income, such as royalties?
Is the activity one-off, or is it commercial in nature?

The same NFT can give rise to Income Tax, Capital Gains Tax, or both, at different stages.

Buying and Holding NFTs

Buying an NFT

Buying an NFT with GBP or cryptocurrency is not itself a taxable event.

Caution: Buying with Crypto

However, if you buy an NFT using crypto (e.g. paying 1 ETH), that crypto is treated as being disposed of at its GBP value at the time of purchase.

This can create a Capital Gains Tax liability on the crypto used to make the purchase.

The NFT is then acquired at a cost equal to the GBP value of the crypto used plus any directly attributable transaction fees.

Holding an NFT

Simply holding an NFT does not trigger tax. There is no tax on owning an NFT, price movements while you hold it, or moving it between your own wallets.

Selling or Trading NFTs

Selling an NFT

Selling an NFT is a disposal of an asset and is normally subject to Capital Gains Tax (CGT).

The gain or loss is calculated as: Sale proceeds (GBP) minus Acquisition cost minus Allowable costs.

Selling an NFT for ETH or another token is still treated as a disposal at market value in pounds.

Example: Selling an NFT

What happens

NFT purchased for £1,200
NFT later sold for £3,500

Tax position

Capital gain: £2,300
Combined with other annual gains

The October 2024 CGT Rate Change (NFT-Specific Impact)

Capital Gains Tax rates changed on 30 October 2024.

Sold Before 30 Oct 2024

10% (Basic rate)
20% (Higher rate)

Sold On/After 30 Oct 2024

18% (Basic rate)
24% (Higher rate)

Note: Because NFTs are unique assets, they cannot be pooled (Section 104 pool) like Bitcoin or ETH. Each NFT stands alone. This makes the exact sale date especially important, as the entire gain on a single NFT may fall under the higher post-October rates.

NFTs and Digital Art Creation

Minting NFTs

Minting an NFT (creating the token itself) is not usually a taxable event. Tax arises when the NFT is sold, or the creator receives payment or rewards linked to it.

Hobby vs Commercial Creation

HMRC distinguishes between casual creation and commercial activity.

The £1,000 Trading and Miscellaneous Income Allowance

If your gross income from NFT creation (total sales before fees) is £1,000 or less in the tax year, the income is completely tax-free and usually requires no reporting.

Once gross income exceeds £1,000, you must report the activity and pay tax on the profit (not just the excess).

Commercial NFT Creation

If NFT creation is regular, organised, or intended to generate profit, HMRC is more likely to treat it as self-employment. In that case, NFT sales are taxed as trading income, and allowable business expenses can be deducted.

Creator Income From NFTs

Primary Sales by Creators

When a creator sells their own NFT, the proceeds are usually taxed as income. This reflects payment for creative work, not the sale of an investment.

Example: Creator Sale

What happens

Artist sells an NFT for £2,000 (paid in ETH).

Tax Position

£2,000 taxed as income
ETH received has a base cost of £2,000 for future CGT

Royalties From NFTs

NFT royalties received on secondary sales are treated as income. Each royalty payment is taxable when received, valued in GBP at receipt, and added to the creator’s income for the year.

VAT Considerations for NFT Creators

VAT Threshold (2024 Update)

From 1 April 2024, the UK VAT registration threshold increased to £90,000 (up from £85,000).

If a creator’s total taxable supplies (primary sales, royalties, related services) exceed £90,000 in any rolling 12-month period, they must register for VAT.

Reporting NFTs: 2024–2025 Change

Starting with the 2024–2025 tax year, HMRC has introduced a dedicated cryptoasset section on the Capital Gains Tax return (SA108).

Previously, NFTs were often reported under “other assets”. They must now be reported separately as cryptoassets. This makes NFT activity more visible to HMRC.

Situs (Location) of NFTs

For UK tax purposes, HMRC treats cryptoassets — including NFTs — as being situated in the UK if the owner is UK resident.

This means an NFT is not a “foreign asset” simply because it is hosted on decentralised infrastructure or traded on an overseas platform like OpenSea. This is particularly relevant for non-doms and international users.

Common Areas of Confusion

“NFTs are taxed differently from crypto”: They use the same underlying principles.
“Creators pay CGT on first sale”: Primary sales are usually income.
“Royalties are capital receipts”: Royalties are income when received.
“NFTs on foreign platforms are foreign assets”: Situs follows the owner’s UK residence.

Summary

NFTs are taxed using existing UK tax rules
Buying an NFT is not taxable, but spending crypto may be
Selling NFTs as an investor usually triggers Capital Gains Tax
CGT rates increased on 30 October 2024, making sale timing critical
NFT creators are usually taxed under Income Tax rules
The £1,000 trading allowance fully shelters small-scale creators
Royalties are taxable as income when received
VAT registration may be required once taxable supplies exceed £90,000
NFTs must now be reported in the dedicated cryptoasset section of the CGT return

HMRC focuses on what activity is taking place, not on the label “NFT”. Understanding whether value arises from creation, ownership, or ongoing income is essential to reporting NFTs correctly in the UK.

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