Crypto and Tax in the UK: A Guide to HMRC Rules in 2025
Dom Farnell
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Dom, a Co-Founder at TIC, is an avid investor and experienced blogger who specialises in financial markets and wealth management. He strives to help people make smart investment decisions through clear and engaging content.
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Last Updated 23/04/2025
Trading Cryptocurrency all these years, I’ve had losses and Wins. While it is easy to get swept up in the excitement of trading it is important to remember that trading crypto in the UK is taxable. When I first started trading I’d assumed, like many people, that HMRC wasn’t too concerned about crypto. Turns out, they were very much paying attention — and I had some catching up to do.
Since then, I have taken crypto taxes seriously. I have worked with HMRC guidelines, utilised crypto tax tools, consulted with accountants, and gone through the Self Assessment process myself. If you’re trading, staking, or even just receiving the odd airdrop, there’s a good chance you’ll owe something, and it’s better to know upfront than be surprised later.
Quick Answer: How Are Taxes paid on Crypto?
Crypto is taxed as property in the UK. You may owe Capital Gains Tax on sales, swaps, or spending, and Income Tax on staking, mining, or payments. HMRC monitors crypto closely, so accurate reporting and good record-keeping are essential.
HMRC has really stepped up its game recently. They’re working with exchanges like Coinbase, using data analytics, and making it harder to fly under the radar. Whether you’re making gains or earning crypto as income, understanding your tax obligations is no longer optional — it is essential.
In this guide, I’ll walk you through how crypto is taxed in the UK in 2025, what’s changed, and how to stay compliant (and stress-free). I’ll also share some personal insights, tools I’ve used, and tips to make the whole process easier.
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How Is Crypto Taxed in the UK?
HMRC doesn’t view Bitcoin or Ethereum as currency. In fact, they officially treat crypto as property. And that classification changes everything when it comes to tax.
Because crypto is seen as property, any time you dispose of it — whether you’re selling, swapping one coin for another, spending it on goods, or even gifting it to someone (who’s not your spouse) — you’re potentially creating a Capital Gains Tax event.
That means HMRC wants to know the value of your crypto at the time you got it and what it was worth when you disposed of it. The difference is your gain or loss, and that’s what’s taxed.
But not everything is treated as capital gains. If you’re earning crypto — like I’ve done from staking rewards, airdrops, or transactions where someone has paid in crypto — HMRC sees that as income, and it gets taxed like any other earnings.
To make it clearer, here’s a quick breakdown of how different crypto activities are taxed in the UK:
Crypto Activities and Tax Treatment
| Activity | Taxable? | Tax Type |
|---|---|---|
| Buying and holding | ❌ | N/A |
| Selling BTC for GBP | ✅ | Capital Gains Tax |
| Swapping ETH for SOL | ✅ | Capital Gains Tax |
| Staking rewards | ✅ | Income Tax |
| Freelancing for crypto | ✅ | Income Tax |
| Gifting to a spouse | ❌ | N/A |
Once I understood which activities triggered tax and which didn’t, it became much easier to stay compliant and avoid any surprises from HMRC.
What’s New in 2025 for Crypto Tax?
One of the biggest changes this year is the drop in the Capital Gains Tax (CGT) exemption, which has now been slashed to just £3,000. A couple of years ago, it was £12,300 — so if you’ve been relying on that buffer, it’s time to rethink your strategy.
Personally, this change has pushed me to be more proactive in how I manage my crypto portfolio. I now keep a closer eye on gains throughout the year, not just at tax time.
Another shift I’ve noticed is that HMRC is now actively working with exchanges, both in the UK and overseas. If you thought your trades weren’t visible to the tax office, think again. The data-sharing agreements are very real, and HMRC has started sending out letters to crypto holders who may not have declared everything.
That’s why recordkeeping is absolutely crucial. I log every transaction, no matter how small. And if you realise you’ve missed something in the past, voluntary disclosure is your best friend — it’s always better to be upfront than to get caught out.
Capital Gains vs. Income Tax: What’s the Difference?
I assumed all profits were treated the same, but HMRC sees it very differently depending on how you’re making money.
Let’s start with Capital Gains Tax. You owe CGT when you dispose of crypto — that includes:
- Selling coins for fiat (like GBP)
- Swapping one coin for another (e.g. ETH for SOL)
- Spending crypto on goods or services
- Gifting crypto to someone who isn’t your spouse
One thing I didn’t realise at first is that even swapping one token for another counts as a disposal in the UK. I used to rotate between coins regularly without thinking about tax — but each swap is a taxable event. You can deduct the purchase cost, exchange fees, and a few other allowable costs to reduce your gain.
On the other hand, Income Tax kicks in when you’re earning crypto. That includes:
- Staking rewards (e.g. getting more ADA or ETH for locking up your tokens)
- Mining (whether as a hobby or business)
- Getting paid in crypto for work or services
- Receiving certain airdrops, especially when they involve effort (like promoting a project or signing up)
I’ve been paid in USDT and ETH, even though it’s not traditional income; HMRC treats it as if you were paid in pounds. You need to declare the value at the time you received it, and it falls under your normal income tax band.
Here’s a breakdown to help clear things up:
Capital Gains vs. Income Tax Explained
| Scenario | Tax Type | Description |
|---|---|---|
| Swapped ETH for SOL | Capital Gains | Gain/loss based on market value at time of swap |
| Staked ADA and received rewards | Income Tax | Taxed when received as income |
| Airdrop with no effort | Often Capital Gains | Treated like a gift; taxed when sold |
| Mining coins regularly | Income Tax | Treated as self-employed income |
Understanding this distinction helped me massively — not just in reporting correctly, but also in planning my trades more strategically.
What Are the Crypto Tax Rates in 2025?
The answer depends on whether you’re being taxed under Capital Gains Tax or Income Tax, and which tax band you fall into.
Let’s start with Capital Gains Tax. In 2025, if you’re a basic rate taxpayer, you’ll pay 10% on any gains above your allowance. If you fall into the higher or additional rate bands, the rate jumps to 20%. What’s really changed this year is the Capital Gains Tax-free allowance — it is now £3,000, down from £6,000 in 2024. That means even smaller gains can start triggering a tax bill.
Personally, I’ve started tracking my gains more closely throughout the year so I can stay under that allowance where possible — or at least plan ahead for the tax hit.
Now, if you’re earning crypto then it is subject to Income Tax, and is taxed at your regular rate:
- 20% for basic rate taxpayers
- 40% for higher rate
- 45% for additional rate
And if you’re mining crypto as a business or doing it regularly, HMRC may consider you self-employed. That means in addition to income tax, you might also owe Class 2 or Class 4 National Insurance. That caught me off guard the first time I mined some altcoins during a bull run and didn’t realise it could be classed as self-employment.
So whether you’re trading or earning, it’s crucial to know which tax rates apply to you. Knowing in advance beats scrambling to cover an unexpected bill later.
How Do You Report Crypto Taxes to HMRC?
To complete your report, HMRC needs a few key pieces of information. You need to make a record of every taxable event, whether it’s a profit from selling crypto, a gain from swapping coins, or income you’ve earned through staking or freelance work. HMRC doesn’t need to see every trade line-by-line, but they do want to know:
- The profit or loss for each disposal
- Any crypto income received
- The fiat value (in GBP) at the time of each transaction
What Deadlines Do I Need to keep in mind?
The current UK tax year ends on 5th April 2026, and the deadline to file your Self Assessment is 31 January 2026. But honestly, I wouldn’t wait that long. I now start reviewing my trades in April or May, just to avoid any last-minute panic in January — and it gives me time to fix any missing info or exchange data issues.
How Can I stay on top of records?
You need to know your cost basis (what you paid for the crypto), your sale price, and the date of each transaction. That’s not always easy if you’ve used multiple wallets or exchanges — which is why I now rely on automated tools.
These tools pull your transaction history from exchanges, calculate your gains/losses, and even generate HMRC-ready tax reports. They’ve saved me hours — and probably saved me from mistakes too.
What Happens If You Don’t Report Your Crypto Gains?
If you don’t report your crypto gains, the consequences can be pretty serious.
You could face penalties for late or missing tax returns, and HMRC will charge interest on any unpaid amounts. And if they believe you’ve deliberately hidden gains, things can escalate quickly. I’ve seen cases where traders were hit with hefty fines or even full-blown audits, especially when data from exchanges didn’t match what was declared (or not declared at all).
HMRC now receives data from platforms like Coinbase, eToro and others, so if you’ve made trades through major exchanges, chances are they already have that information on file. That’s why I always tell traders — even if you think the amount is small, it’s better to disclose it voluntarily than risk being flagged later.
I’ve filed amended returns before when I realised I missed something, and it was way less stressful than waiting and hoping HMRC wouldn’t notice. When it comes to crypto, being upfront is the safer (and smarter) option.
How Can You Legally Reduce Your Crypto Tax Bill?
Let’s be honest — no one wants to pay more tax than they have to. Over the past few years, I’ve picked up a few legal (and HMRC-approved) ways to reduce my crypto tax bill — and they’ve saved me a decent chunk.
First off, make sure you’re using your £3,000 Capital Gains Tax allowance. That’s free profit before tax kicks in, and I try to use it every year, even if it means realising small gains intentionally.
Next, if you’ve had a bad year and sold crypto at a loss — don’t let that pain go to waste. You can offset those losses against your future gains, which I’ve done to lower what I owe down the line.
Another strategy I’ve heard of is gifting crypto to my spouse. HMRC allows this without triggering a tax event, which opens the door to using both your allowances and potentially spreading the tax burden more efficiently.
Additionally, I know traders who engage in tax-loss harvesting in December — selling underperforming assets to lock in losses, then repurchasing them later if they still believe in the project.
And while crypto can’t go in an ISA, I do invest some fiat profits into stocks and funds inside an ISA. That way, future growth from those gains is tax-free.
What Should You Do Before the Tax Deadline?
Here’s a checklist of what I do every year before filing:
- Export all exchange and wallet data
- Run everything through a crypto tax tool.
- Check whether I’ve used my CGT allowance.
- Declare all income and gains — even small ones.
- Submit my Self Assessment by 31 January 2026
A bit of prep goes a long way — and saves a lot of stress later.
Final Thoughts on Paying Tax on Cypto in 2025
Crypto tax used to feel intimidating — but it is about being organised and proactive. I’ve learned that staying on top of things throughout the year makes tax season way less stressful.
With the CGT allowance now down to £3,000, there’s less room to ignore the details. If you’re trading, earning, or even just dabbling in DeFi, keeping good records is more important than ever. And honestly, the sooner you get your system in place, the more confident you’ll feel.
FAQs
No — thankfully, holding crypto doesn’t trigger tax. You only owe tax when you sell, swap, spend, or gift it (unless it’s to your spouse).
Nope. If the wallets are both yours, it’s just a transfer — not a disposal. I move between cold storage and exchanges regularly, and it doesn’t affect my tax position.
Been there. You can report the loss and offset it against future gains, which helps reduce what you owe later on. Just make sure you report it, or it won’t count.
Yes, HMRC taxes crypto as property. You may owe Capital Gains Tax when you sell or swap crypto, and Income Tax if you earn it through staking, mining, or payments
In 2025, the Capital Gains Tax allowance is £3,000. Any crypto gains above this threshold may be taxed at 10% or 20%, depending on your income band.
Yes, staking rewards are considered income and are subject to Income Tax based on your tax band. You’ll need to declare the GBP value at the time the rewards were received.
You must report all taxable events, including sales, swaps, and income from crypto. HMRC doesn’t require every transaction detail but does expect accurate summaries.
Yes, if you made a loss on crypto, you can report it to HMRC and offset it against current or future capital gains. Just make sure to log the loss accurately.
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Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong. Take 2 mins to learn more.
References:
- HMRC Cryptoassets – HMRC internal manual
- GOV.UK – Capital Gains Tax Overview
- Coinbase – Buy & Sell Bitcoin, Ethereum, and more with trust
- MoneySavingExpert – Tax rates 2025/26: tax bands explained
- PwC UK – 2024 Crypto Taxation Insights
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