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Selling cryptocurrency in the UK raises a tax question that confuses a significant number of investors and traders. The name “cryptocurrency” implies it is a form of currency, and currency is generally not subject to capital gains tax in the UK. But HMRC does not treat crypto as currency. It treats crypto assets as chargeable assets for capital gains tax purposes — and in some circumstances, as a source of income instead. Getting the distinction wrong can mean underpaying tax, facing penalties from HMRC, or missing opportunities to use losses and allowances efficiently.
Our tax advisors at Tax Accountant work with crypto investors, traders and businesses on cryptocurrency tax compliance, and this is one of the most rapidly evolving areas of UK tax that we advise on.
How Does HMRC Classify Cryptocurrency?
HMRC’s position is clear and has been stated consistently since 2018. Crypto assets are not currency and they are not money. HMRC published its Cryptoassets Manual to set out the tax treatment in detail, and the starting point is that crypto assets are property for tax purposes. This means disposals of crypto assets are subject to capital gains tax in the same way as disposals of shares, land or any other chargeable asset.
HMRC recognises several types of crypto asset. Exchange tokens — such as Bitcoin and Ethereum — are the most common. Utility tokens give the holder access to a product or service. Security tokens confer rights similar to those held by shareholders or creditors. Stablecoins are designed to maintain a stable value relative to a fiat currency or other asset. The tax treatment can differ between these types, though exchange tokens and most utility tokens are treated as chargeable assets subject to CGT on disposal. HMRC’s Cryptoassets Manual covers the classification and tax treatment of each type in full.
What Counts as a Disposal of Crypto?
A disposal for CGT purposes is broader than most people realise. You make a disposal — and potentially trigger a CGT charge — in each of the following situations. Selling crypto for fiat currency such as pounds or dollars. Exchanging one crypto asset for another. Using crypto to pay for goods or services. Gifting crypto to someone other than your spouse or civil partner. Moving crypto into a staking or liquidity pool in some circumstances.
Each of these events is a disposal at the market value of the crypto at the time of the transaction, converted into pounds sterling. This means that even if you never convert your crypto back to pounds, you can still trigger CGT every time you swap one coin for another. Many investors are unaware of this. They assume that exchanging Bitcoin for Ethereum is a tax-neutral event. It is not. The exchange is a disposal of Bitcoin at its sterling value on the date of the transaction, and any gain relative to the original acquisition cost is a chargeable gain. HMRC’s guidance on Capital Gains Tax and cryptoassets makes this explicit.
How Is the Gain Calculated?
The gain on a crypto disposal is calculated as the disposal proceeds — the sterling value of what you received — minus the allowable cost of acquisition. For most straightforward purchases, the allowable cost is the amount you paid in pounds, plus any transaction fees directly associated with the acquisition.
Where you have bought the same type of crypto asset multiple times at different prices, HMRC applies a specific matching and pooling methodology. This is the share pooling method, also known as the section 104 pool. All acquisitions of the same type of crypto asset are pooled together. The average cost of the pool is recalculated each time you acquire more. When you dispose of some of the asset, the allowable cost is the average cost per unit multiplied by the number of units disposed of.
On top of the section 104 pool rules, HMRC applies two priority matching rules. Same-day acquisitions are matched first — if you buy and sell the same crypto on the same day, the acquisition and disposal are matched against each other. Acquisitions within the following 30 days are matched next — this is the bed-and-breakfast rule, which prevents investors from selling crypto at a loss and immediately rebuying to crystallise a capital loss while maintaining their position. Both priority rules must be applied before the section 104 pool is used.
What CGT Rates Apply to Crypto Gains?
For 2025/26, capital gains on crypto assets are taxed at 18% where the gain falls within your basic rate income tax band and at 24% where it falls within the higher or additional rate band. The rate that applies depends on the level of your taxable income in the year of disposal. Gains that sit within the unused basic rate band after income is accounted for are taxed at 18%. Gains above the basic rate threshold are taxed at 24%.
The annual CGT exempt amount for 2025/26 is £3,000. Total net gains up to this amount in the tax year produce no CGT liability. Where your net gains — after deducting allowable losses — exceed £3,000, the excess is taxable at the appropriate rate. Capital losses from crypto disposals can be set against gains from crypto or any other chargeable asset in the same tax year. Unused losses carry forward to future years.
When Is Crypto Income Taxed as Income Rather Than Capital Gains?
CGT applies to investment activity. But where your crypto activity constitutes a trade, the profits are subject to income tax and National Insurance contributions instead. Whether an individual’s crypto activity amounts to trading depends on the specific facts — the frequency and scale of transactions, the intention behind them, the degree of organisation and the level of sophistication involved. HMRC applies the traditional badges of trade to crypto activity in the same way it applies them to any other potential trading activity.
In practice, most individuals who buy and sell crypto assets are investors rather than traders. Their gains are subject to CGT. However, where someone operates at very high volumes, uses sophisticated automated strategies, treats it as a primary occupation or holds crypto for very short periods with a clear profit motive, HMRC may take the view that the activity is a trade. If that happens, income tax rates of up to 45% apply rather than CGT rates of 18% or 24% — a significantly worse outcome.
Beyond trading, certain other crypto activities are treated as income regardless of whether a trade exists. Mining rewards received by an individual are treated as miscellaneous income at the point of receipt if the activity does not amount to a trade, or as trading income if it does. Staking rewards are treated as miscellaneous income in most cases. Airdrops may be treated as income depending on the circumstances under which they are received. Employment income paid in crypto is subject to income tax and National Insurance in the same way as cash salary — the employer values the crypto at the sterling market value on the date of payment and operates PAYE accordingly.
The New Crypto Asset Reporting Requirements
From 1 January 2026, crypto asset service providers — exchanges, wallet providers and other platforms — are required to collect, record and retain customer information including name, address, country of tax residence and tax identification number. This information will be shared with HMRC as part of an international data-sharing framework. The practical consequence is that HMRC will have increasingly detailed data on UK taxpayers’ crypto holdings and transaction histories, making accurate and timely reporting more important than ever.
HMRC has made clear that it is actively using data from crypto platforms to identify taxpayers who have not reported gains correctly. Receiving a nudge letter from HMRC about crypto income or gains is not unusual — and responding to one incorrectly or ignoring it can escalate quickly into a formal enquiry. Our HMRC compliance check service covers responses to HMRC nudge letters and formal enquiries relating to crypto.
What Records Do You Need to Keep?
HMRC places the record-keeping obligation firmly on the individual. You must maintain records of every crypto transaction. The records required include whether the transaction was a purchase or sale, the type of crypto asset, the date of the transaction, the value of the transaction in pounds sterling at the date of the transaction, the cumulative total of units held after each transaction, and bank statements and wallet addresses in case HMRC requests them during an enquiry or review.
Many crypto exchanges provide transaction histories, but these are not always complete — particularly where you have used multiple platforms, moved assets between wallets or participated in decentralised finance protocols. Reconstructing an incomplete transaction history after the fact is time-consuming and difficult. Maintaining contemporaneous records from the outset is considerably easier. If your records are incomplete, our team can help you reconstruct what is available and make a reasonable approach to the gaps.
How Is Crypto Reported to HMRC?
Gains from crypto disposals are reported through self-assessment. The capital gains summary pages — form SA108 — are used, specifically boxes 13.1 to 13.8. The reporting deadline is 31 January following the end of the tax year in which the disposal occurred. For disposals in the 2024/25 tax year, the reporting and payment deadline is 31 January 2026.
Where crypto income arises — from mining, staking, airdrops or employment — it is reported on the income pages of the self-assessment return in the appropriate category. Mining and staking income treated as miscellaneous income goes on the other income pages. Employment income paid in crypto is reported through PAYE in the normal way.
Where you have not previously reported crypto gains and believe you have underpaid tax, making a voluntary disclosure before HMRC contacts you is the best course of action. Unprompted disclosures attract lower penalty rates than those made after HMRC has already been in touch. Our HMRC disclosure facilities service handles voluntary disclosures for clients with unreported crypto gains. The ICAEW has published useful technical commentary on crypto tax compliance and reporting for those navigating more complex positions.
How Our Tax Advisors Can Help
Crypto tax compliance involves more moving parts than most investors expect. The disposal rules, the section 104 pool, the same-day and 30-day matching rules, the income versus capital distinction, the record-keeping requirements and the new platform reporting obligations all need to be understood and applied correctly. HMRC is increasingly well-informed about crypto activity and is actively pursuing cases where gains have not been reported.
Our team works with crypto investors, traders and businesses on the full range of crypto tax issues — from preparing annual CGT calculations and self-assessment returns, to handling HMRC enquiries and voluntary disclosures for unreported gains. We do this through our personal capital gains tax service and our personal tax services.
If you have sold, exchanged or otherwise disposed of crypto assets and are unsure whether you need to report a gain, or if you have undisclosed crypto gains from previous years, get in touch with our team as soon as possible. The earlier you act, the better the outcome.