If you've bought, sold, swapped, staked or been paid in crypto, you probably owe HMRC something, and it isn't always obvious what.
The hard part isn't the rates. It's working out whether a transaction is a capital gain or income, keeping track of every disposal across a dozen wallets and exchanges, and getting it onto your tax return before HMRC's data-matching catches up with you.
This guide explains how crypto tax works in the UK for the 2025/26 tax year. We'll cover when you pay Capital Gains Tax, when it's Income Tax instead, the pooling rules that trip most people up, two worked examples, and exactly how to report it to HMRC. It's written for UK investors, traders and business owners who hold cryptoassets personally.
Is cryptocurrency taxed in the UK?
Yes. HMRC doesn't treat cryptoassets such as Bitcoin or Ether as currency or money. For most individuals, it treats them as a form of personal investment, so the tax that applies depends on what you do with them.
There are two taxes to keep separate in your head:
- Capital Gains Tax (CGT) when you dispose of crypto you already own (selling, swapping or spending it).
- Income Tax when you receive crypto as a reward or earnings (mining, staking, getting paid in crypto, some airdrops).
Simply buying crypto with pounds and holding it isn't taxable. The tax events happen later, when you do something with it or when you earn it in the first place.
A quick but important point: this guide covers crypto held as a personal investment. If you trade with such frequency, organisation and scale that HMRC views it as a financial trade, profits can be taxed as trading income under the rules for sole traders instead. That's rare for individuals, but worth knowing it exists.
When do you pay Capital Gains Tax on crypto?
You make a disposal, and potentially trigger CGT, whenever you:
- sell crypto for pounds or any other fiat currency
- exchange one cryptoasset for another (for example, swapping Bitcoin for Ether)
- use crypto to pay for goods or services
- give crypto away to another person (other than your spouse or civil partner)
That second point catches a lot of people out. Swapping one token for another is a disposal even though no cash leaves your account. You're treated as selling the first token at its market value in pounds on the day.
Your gain is the difference between what you get for the tokens (the disposal proceeds) and your allowable cost. Allowable costs include what you paid for the tokens plus transaction fees, valuation costs and a proportionate share of your pooled cost.
Two disposals are not taxable:
- Gifts to your spouse or civil partner. These pass across at no gain, no loss.
- Gifts to a registered charity. These are exempt from CGT.
What are the crypto CGT rates and allowance for 2025/26?
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You only pay CGT on total gains above the annual exempt amount. For 2025/26 that allowance is £3,000.
Above the allowance, the rate depends on where the gain sits when stacked on top of your income. Cryptoassets are taxed at the standard "other asset" rates, not the residential property rates.
| Where the gain falls | Crypto CGT rate (2025/26) |
|---|---|
| Within your remaining basic rate band | 18% |
| Above the basic rate band (higher/additional) | 24% |
To work out which rate applies, you add your taxable gains to your taxable income. Any part of the gain that fits inside the unused part of your basic rate band is taxed at 18%; anything above is taxed at 24%.
For reference, the 2025/26 Income Tax bands are:
| Band | Taxable income | Income Tax rate |
|---|---|---|
| Personal allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £125,140 | 40% |
| Additional rate | Over £125,140 | 45% |
The basic rate band itself is the first £37,700 of taxable income above the personal allowance.
How do the pooling rules work?
You can't just match each sale to a specific purchase. HMRC uses share-pooling rules (the same approach used for shares) to value your crypto.
Here's the principle:
- Each type of token (all your Bitcoin, all your Ether, and so on) goes into its own pool, sometimes called a Section 104 pool.
- The pool holds the total tokens and the total cost you paid for them.
- When you dispose of some tokens, your allowable cost is the average cost of the tokens in that pool.
So if you bought Bitcoin three times at different prices, you don't get to pick the cheapest or most expensive batch. You use the blended average.
There are two special rules that take priority over the pool, designed to stop people from selling and instantly rebuying to crystallise a loss:
- Same-day rule. Tokens of the same type bought and sold on the same day are matched together first.
- 30-day (bed and breakfasting) rule. If you sell tokens and buy the same type back within the next 30 days, the disposal is matched to those new purchases rather than the pool.
These matching rules are fiddly, and they're where most do-it-yourself crypto tax calculations go wrong.
When is crypto taxed as income instead?
Some crypto isn't bought, it's earned. When you receive tokens as a reward or as payment, the pound value on the day you receive them is usually taxable as income, not as a capital gain.
This covers:
- Mining and staking rewards. Tokens you receive from mining or staking are normally taxable as miscellaneous income at their sterling value on the day you receive them.
- Lending and some DeFi returns. Returns that look like a reward for providing your tokens are typically taxed as income.
- Being paid in crypto by an employer. This is earnings, subject to Income Tax and National Insurance. Where the tokens are "readily convertible assets", your employer usually has to operate PAYE on them.
- Some airdrops. An airdrop received in return for doing something (a service, a promotion) is income. A pure airdrop received for nothing, with no service in return, often isn't income, but a later sale can still be a CGT disposal.
There's a useful let-out for small amounts. HMRC's £1,000 trading allowance can cover miscellaneous income such as small staking or mining receipts. If your relevant income for the year is £1,000 or less, you generally don't need to report it. Above that, it becomes reportable.
The important knock-on effect: tokens you've already paid Income Tax on take that taxed value as their base cost. When you later sell them, you only pay CGT on the growth since you received them, not on the whole amount again.
Worked examples
These are illustrative figures using 2025/26 rates. They're simplified to show the method, not to cover every wrinkle.
Illustrative example 1: a basic-rate investor selling Bitcoin
Tom is employed and earns £35,000 a year. During 2025/26 he sells Bitcoin for £12,000. His average pooled cost for those tokens was £4,000, and he paid £100 in exchange fees on the sale.
- Disposal proceeds: £12,000
- Less pooled cost: £4,000
- Less allowable fees: £100
- Gain: £7,900
He deducts his £3,000 annual exempt amount, leaving a taxable gain of £4,900.
Tom's taxable income is £35,000 minus the £12,570 personal allowance, so £22,430. The basic rate band runs to £37,700 of taxable income, leaving him £15,270 of unused basic rate band, comfortably more than his £4,900 gain. So the whole gain is taxed at 18%.
- CGT due: £4,900 x 18% = £882
Illustrative example 2: a higher-rate investor with a token swap
Anya earns £70,000 and is a higher-rate taxpayer. In 2025/26 she swaps Ether worth £20,000 for another token. Her pooled cost in that Ether was £8,000. The swap is a disposal at market value.
- Disposal proceeds (market value of the Ether swapped): £20,000
- Less pooled cost: £8,000
- Gain: £12,000
She deducts her £3,000 annual exempt amount, leaving a taxable gain of £9,000.
Anya's income already uses up her basic rate band, so the whole gain sits in the higher band and is taxed at 24%.
- CGT due: £9,000 x 24% = £2,160
Note that Anya hasn't taken any cash out, she only swapped tokens, but she still has a real tax bill to fund. That's the trap with crypto-to-crypto swaps.
How do you report crypto to HMRC?
For nearly all individuals, crypto gains and crypto income go on a Self Assessment tax return. Capital gains go in the capital gains pages; staking, mining and similar receipts go in as other taxable income.
The deadlines that matter for 2024/25 income and gains, and the same pattern repeats each year:
- Register for Self Assessment by 5 October after the end of the tax year if you've not filed before.
- File online and pay by midnight on 31 January after the tax year ends.
Good records are non-negotiable, because HMRC expects you to be able to back up every figure. Keep, for each transaction:
- the type of token and the number of units
- the date of acquisition and disposal
- the value in pounds at the time
- the running pool totals (units and cost)
- bank statements and wallet addresses, and a record of which exchange was used
If you've missed crypto from earlier returns, HMRC runs a dedicated voluntary disclosure route for unpaid tax on cryptoassets. Coming forward before HMRC contacts you almost always means lower penalties.
To estimate the CGT before you file, our Capital Gains Tax calculator gives you a quick read on the likely bill.
What's changing with CARF reporting?
From 1 January 2026, the UK adopts the OECD's Cryptoasset Reporting Framework (CARF). In short, UK crypto platforms have to collect identifying details about their users (including name, address and tax reference) and report users' transactions to HMRC.
Providers start collecting data from 1 January 2026, with the UK due to make its first international CARF data exchanges in 2027. After that, the data is exchanged on an ongoing basis with other tax authorities that have adopted CARF.
The practical message is simple: the days of crypto being invisible to HMRC are ending. Reporting your gains and income properly now is far cheaper than a discovery and penalties later.
If your affairs are getting complicated, with multiple exchanges, DeFi income or a possible trading position, it's worth getting them reviewed. Our tax advisory team can untangle the pooling, separate income from gains, and make sure your Self Assessment return is right.
Worried about getting your crypto tax right? Book a free 20-minute call with a Zmartly accountant. We'll review your situation, explain what you owe, and handle the reporting for you. Get in touch.
Crypto tax FAQs
Do I pay tax just for holding crypto?
No. Buying crypto with pounds and holding it isn't a taxable event. Tax only arises when you dispose of it (a possible capital gain) or when you receive it as a reward or earnings (income). Holding alone, even if the value goes up on paper, isn't taxed.
Is swapping one crypto for another taxable?
Yes. Exchanging one cryptoasset for another is a disposal for CGT, even though no cash changes hands. You're treated as selling the first token at its pound market value on the day, and a gain or loss arises against your pooled cost.
How much crypto can I sell tax-free in 2025/26?
You can realise total capital gains up to the annual exempt amount of £3,000 in 2025/26 without paying CGT. That allowance covers all your gains for the year, not just crypto, and it can't be carried forward if unused.
Is staking taxed as income or capital gains?
Both, at different stages. Staking rewards are normally taxable as income at their pound value on the day you receive them. If you later sell those tokens, any increase in value since you received them is a separate capital gain.
What happens if I made a loss on crypto?
Capital losses can be set against your gains to reduce your CGT. If your losses exceed your gains for the year, you can carry the excess forward to future years, but you generally have to report (claim) the loss to HMRC, usually within four years of the end of the tax year, to use it.
Will HMRC know about my crypto?
Increasingly, yes. Under the Cryptoasset Reporting Framework, UK crypto platforms collect user details from 1 January 2026 and report users' transactions to HMRC, with the UK due to begin international data exchanges in 2027. It's far safer to report accurately than to assume your activity is invisible.
