How Does HMRC Tax Crypto in the UK?

HMRC treats cryptocurrency as property, not currency. When you dispose of crypto assets — by selling, swapping, or spending them — you may owe Capital Gains Tax (CGT) at 18% (basic rate) or 24% (higher rate). The annual exempt amount is now just £3,000. Cost basis is calculated using the mandatory share pooling method, not FIFO. Mining and staking income may be subject to Income Tax at 20%, 40%, or 45% depending on your band.

HMRC's Classification of Cryptoassets

HMRC published its Cryptoassets Manual (CRYPTO10000 series) to clarify the tax treatment of digital assets in the UK. The manual, which is regularly updated, establishes the foundational principle: cryptoassets are not money or currency for tax purposes. Instead, they are treated as a form of property.

This classification has wide-reaching implications. Unlike traditional currency transactions, virtually every use of crypto can trigger a taxable event. The relevant categories include:

Exchange tokens (Bitcoin, Ether): Treated as property subject to CGT on disposal and Income Tax on receipts
Utility tokens: Taxed similarly to exchange tokens when disposed of
Security tokens: May fall under existing financial instruments tax rules
Stablecoins: Still treated as cryptoassets — pegging to fiat does not make them currency
NFTs: Subject to CGT; unique NFTs may qualify for chattels exemption if proceeds are under £6,000

HMRC's position is that each token type is assessed on its individual characteristics, but the vast majority of retail crypto holders will deal primarily with exchange tokens.

Capital Gains Tax Rates and Thresholds

Since April 2024, CGT rates on crypto disposals have increased significantly. The current rates for the 2025/26 tax year (6 April 2025 to 5 April 2026) are:

Tax Band	CGT Rate (from April 2024)	Previous Rate
Basic rate (up to £37,700 taxable income)	18%	10%
Higher/Additional rate	24%	20%

These rates apply after deducting the annual exempt amount. The exempt amount has been dramatically reduced over three consecutive years:

2022/23: £12,300
2023/24: £6,000
2024/25 onward: £3,000

At £3,000, most active crypto traders will exceed the exemption quickly. A single profitable trade of a few thousand pounds could generate a CGT liability. The exempt amount applies per individual — married couples and civil partners each receive their own £3,000 allowance.

The Share Pooling Method: Section 104 Pool

The most distinctive feature of UK crypto taxation is the mandatory use of share pooling for cost basis calculation. Unlike the US, where FIFO or Specific Identification is used, UK taxpayers must use the Section 104 pool — a weighted average method inherited from the rules for shares and securities.

How the Section 104 Pool Works

The Section 104 pool maintains a running total of the quantity and allowable cost of each crypto asset you hold. When you acquire tokens, both the quantity and cost are added to the pool. When you dispose of tokens, a proportionate share of the pooled cost is deducted.

Example:

You buy 2 ETH at £1,000 each = pool is 2 ETH, cost £2,000
You buy 3 ETH at £1,500 each = pool is 5 ETH, cost £6,500
You sell 1 ETH for £2,000 = allowable cost is £6,500 / 5 = £1,300 per ETH
Gain = £2,000 - £1,300 = £700

After the sale, the pool contains 4 ETH with an allowable cost of £5,200 (£6,500 - £1,300).

Each distinct crypto asset has its own Section 104 pool. Your Bitcoin pool is separate from your Ether pool, which is separate from your Solana pool, and so on.

Same-Day Rule and Bed and Breakfasting

Before the Section 104 pool is applied, HMRC requires two anti-avoidance matching rules to be checked first. Disposals are matched in this strict order:

1. Same-Day Rule

If you buy and sell the same crypto asset on the same day, the acquisition and disposal are matched against each other first. This prevents you from selling at a loss and immediately rebuying to crystallize the loss while maintaining your position.

2. Bed and Breakfasting (30-Day Rule)

If you sell a crypto asset and repurchase the same asset within 30 days, the disposal is matched against the repurchase rather than the Section 104 pool. This is the crypto equivalent of the "bed and breakfasting" rule that has long applied to shares.

Example: You sell 1 BTC on 1 March at £40,000 (Section 104 pool cost: £25,000). On 15 March, you buy 1 BTC at £38,000. The 30-day rule applies: your disposal cost is £38,000 (the repurchase price), not £25,000. Your gain is £2,000, not £15,000.

3. Section 104 Pool

Only after checking for same-day and 30-day matches does the disposal draw from the Section 104 pool's weighted average cost.

This three-step matching order is mandatory. You cannot elect to use a different sequence, and getting it wrong is a common source of errors in UK crypto tax returns.

Taxable Disposal Events

HMRC considers the following events as disposals that may trigger CGT:

Selling crypto for fiat currency (GBP, USD, EUR, etc.)
Swapping one crypto for another (e.g., BTC to ETH) — each swap is a disposal of the first asset and an acquisition of the second
Spending crypto on goods or services — treated as a disposal at market value
Gifting crypto (except to a spouse or civil partner) — disposal at market value
Losing access to crypto through negligence is not a disposal; HMRC may allow a negligible value claim in certain circumstances

Transfers between your own wallets are not disposals, provided you retain beneficial ownership. However, you must maintain records of all transfers to demonstrate this.

Mining, Staking, and Airdrops: Income Tax

Not all crypto tax obligations fall under CGT. HMRC applies Income Tax to certain types of crypto receipts, as detailed in guidance CRYPTO61000:

Mining

If you mine crypto as a trade or business, the fair market value of tokens received is taxable as trading income. Hobby mining may be treated differently, but HMRC has provided limited guidance on the hobby vs. trade distinction. National Insurance contributions may also apply to trading income.

Staking

Staking rewards are generally treated as miscellaneous income and taxed at your marginal Income Tax rate:

Basic rate: 20%
Higher rate: 40%
Additional rate: 45%

The cost basis of staking rewards for future CGT purposes is the fair market value at the time of receipt.

Airdrops

Airdrops received without any action on your part may not be immediately taxable. However, if the airdrop is received in return for a service or as part of a trade, it is taxable as income. When you later dispose of airdropped tokens, CGT applies using the income value as cost basis.

DeFi: Lending, Liquidity Pools, and Wrapped Tokens

HMRC's guidance on DeFi (CRYPTO61600 series) takes a notably strict position compared to some other jurisdictions:

DeFi Lending

When you lend crypto through a DeFi protocol, HMRC may treat this as a disposal if beneficial ownership transfers to the borrower or protocol. This means you could owe CGT at the point of lending, not just when you withdraw. Interest received is taxable as income.

Liquidity Provision

Adding tokens to a liquidity pool typically involves disposing of the original tokens and receiving LP tokens in return. Each step may be a taxable event. Removing liquidity reverses the process, potentially creating additional disposals.

Wrapped Tokens

Wrapping a token (e.g., ETH to WETH) may constitute a disposal if HMRC considers the wrapped version a different asset. The guidance is not fully settled, and taxpayers should document their position carefully.

Self Assessment: How to Report

UK crypto gains and income are reported through the Self Assessment tax return. There is no separate crypto-specific form. The relevant sections are:

SA108 (Capital Gains Summary): Report crypto disposals, gains, and losses
SA100 (Main return): Report crypto income (mining, staking, airdrops) in the appropriate income section

Key Deadlines

The UK tax year runs from 6 April to 5 April. For the 2025/26 tax year:

Tax year ends: 5 April 2026
Paper return deadline: 31 October 2026
Online return deadline: 31 January 2027
Payment deadline: 31 January 2027

Late filing incurs an automatic £100 penalty, with additional penalties accumulating over time. Interest is charged on late payments from the due date.

Record-Keeping Requirements

HMRC requires you to keep records for at least 5 years after the 31 January filing deadline. Records should include:

Date of each transaction
Type of cryptoasset
Number of units
Value in GBP at the time of transaction
Bank statements and wallet addresses
Details of the other party (if applicable)

CRS 2.0 and UK Reporting

The UK is an early adopter of CRS 2.0 and the Crypto-Asset Reporting Framework (CARF). Starting from 2026 data collection, UK-regulated crypto exchanges will automatically report user transaction data to HMRC, which will share this information with other participating tax authorities.

This means HMRC will have independent data to verify your Self Assessment return. Discrepancies between reported income and exchange data may trigger compliance checks. Voluntary disclosure before HMRC contacts you typically results in lower penalties than discovery after an investigation.

Losses and Tax Planning

Capital losses from crypto disposals can offset gains, either in the current year or carried forward to future years. However, losses must be reported to HMRC within 4 years of the end of the tax year in which they arise.

Key planning considerations:

Use your annual exempt amount: Realise up to £3,000 in gains each year tax-free
Spouse transfers: Transfers to a spouse or civil partner are tax-free; they can then dispose using their own £3,000 exemption
Timing disposals: Consider splitting large disposals across two tax years (before and after 5 April) to use two exemptions
Harvest losses: Sell losing positions to offset gains — but beware the 30-day rule, which prevents immediate repurchase

Frequently Asked Questions

Do I need to report crypto if I only made a small profit?

Yes. If your total proceeds from all asset disposals (not just crypto) exceed 4 times the annual exempt amount (£12,000 for 2025/26), you must report on your Self Assessment return even if the gain is below £3,000. If your gains are below the exempt amount and proceeds are below this threshold, you may not need to report, but keeping records is still required.

How are crypto-to-crypto swaps taxed?

Every crypto-to-crypto swap is two separate events: a disposal of the asset you are giving up (subject to CGT) and an acquisition of the asset you are receiving (at fair market value in GBP at the time of the trade). This applies to DEX swaps, centralised exchange trades, and cross-chain bridges alike.

What happens if I have not reported crypto gains from previous years?

HMRC's voluntary disclosure facility allows you to correct previous returns. Penalties for voluntary disclosure are significantly lower (0-30% of unpaid tax) than for prompted disclosure after HMRC investigation (20-70%). With CRS 2.0 data exchange beginning in 2026, the window for voluntary correction is narrowing. HMRC has issued "nudge letters" to crypto holders identified through exchange data requests since 2021.

How dTax Handles UK Tax Rules

dTax includes a dedicated UK Share Pooling (Section 104) cost basis method — one of 8 international methods in the tax engine. The implementation follows HMRC's Section 104 pool rules: weighted average cost basis across all acquisitions, with proportional cost allocation on disposal. Same-day and bed-and-breakfasting rules are noted for manual review in v1.

Income from mining, staking, and airdrops is tracked separately from capital disposals. Transaction imports from major UK-popular exchanges (Coinbase, Kraken, Binance, and 20+ others) are automatically classified and matched against the correct pool. The platform calculates your CGT liability at the applicable 18% or 24% rate and generates reports compatible with SA108 Self Assessment filing.

With CARF coming into effect for the UK in 2027, dTax also provides CARF transaction data export — letting you preview exactly what UK exchanges will report to HMRC under the new automatic exchange framework.