HMRC doesn’t consider crypto to be money. It treats it as property, which means most crypto transactions are subject to Capital Gains Tax. With the annual exempt amount now just £3,000, even fairly modest crypto portfolios can trigger a tax bill. And HMRC hasn’t been subtle about this — they’ve been writing directly to crypto investors via exchange data, and non-compliance carries serious penalties.
When You Pay CGT on Crypto
A taxable disposal happens when you:
- Sell crypto for GBP, USD, or any fiat currency
- Swap one crypto for another (yes, swapping Bitcoin for Ethereum is a taxable event — this catches a lot of people out)
- Spend crypto to buy goods or services
- Give crypto away (unless to a spouse or civil partner)
What’s not taxable? Simply buying crypto with GBP and holding it. Transferring between your own wallets. As long as you remain the beneficial owner, moving coins around isn’t a disposal.
How to Calculate Your Gain
The gain = what you sold it for − what you paid (including fees).
HMRC requires the Section 104 pool method for matching disposals to acquisitions. It works like an average cost basis: all tokens of the same type are pooled, and your cost per token is the average across the entire pool. Two anti-avoidance rules apply:
- Same-day rule: Tokens bought and sold on the same day match first
- 30-day rule (bed and breakfasting): Tokens reacquired within 30 days match the disposal, preventing wash sales to crystallise losses
When It’s Income Tax Instead
Some crypto activities are taxed as income rather than capital gains:
- Mining: If you mine as a trade, the tokens are trading income. Hobbyist mining might be miscellaneous income.
- Staking rewards: Generally miscellaneous income, taxable when you receive them at fair market value.
- Airdrops: If you did something to earn them, they’re income. Genuinely unsolicited airdrops with no action required? May not be taxable until disposed of.
- Salary paid in crypto: Taxed as employment income through PAYE at the GBP value on payday.
- DeFi lending interest: Generally treated as miscellaneous income.
DeFi and NFTs
Same principles apply. Providing liquidity to a DEX pool may count as a disposal if you swap tokens for LP tokens. Minting and selling an NFT is a disposal. The more complex your DeFi activity, the messier the tax gets. HMRC’s guidance in this area is still catching up with the technology.
Record-Keeping
HMRC wants detailed records of every transaction, kept for at least 5–6 years. For each one, record:
- Date
- Type of crypto and quantity
- GBP value at the time
- Transaction fees (these are allowable costs)
- Wallet addresses and exchange records
- Running total of the Section 104 pool for each token
If you’ve been trading actively without keeping records, a crypto tax tracking tool like Koinly or CoinTracker can pull your exchange history and reconstruct it. Not fun, but better than trying to explain a blank spreadsheet to HMRC.
Reporting to HMRC
Report via self-assessment. Capital gains go on the capital gains pages; mining and staking income on the income pages. You must report even if your gains are below £3,000, if your total disposal proceeds exceed £12,000 (four times the exempt amount).
Calculate Your Crypto Tax
Our free crypto tax calculator estimates your CGT liability on crypto disposals, accounting for the Section 104 pool, annual exempt amount, and your income tax band.