Last updated on 1 May 2025
If you sell or trade cryptocurrency in the UK and make a profit, you may need to pay Capital Gains Tax. HMRC treats crypto assets, such as Bitcoin and Ethereum, as taxable and offers clear guidelines on how to report and pay CGT.
If you’re involved in cryptocurrency, it’s essential to understand the tax implications, so let’s break it down.
What Is Capital Gains Tax (CGT)?
Capital gains tax, or CGT, is levied on the profit (or gain) you generate when you sell or otherwise dispose of an asset. In the context of cryptocurrency, CGT is triggered when you sell, exchange, or use your crypto for goods or services at a profit. It doesn’t apply just for holding your crypto or receiving it as payment, CGT is only due when there is a disposal.
HMRC treats cryptocurrency like any other asset, such as property or stocks. This implies that any profit you receive from the sale of your cryptocurrency is subject to taxes. The profit is calculated as the difference between the amount you paid for the cryptocurrency and the amount you received when you sold or exchanged it.
Who Must Pay Cryptocurrency Capital Gains Tax?
You could have to pay CGT if you live in the UK and profit from selling cryptocurrencies. This comprises:
- Individuals: Anybody who trades or sells cryptocurrencies.
- Traders: If you trade cryptocurrency frequently, your activities might be classified as trading, in which case, the profits could be treated as income tax rather than CGT.
- Investors: If you’re holding crypto as an investment, then CGT applies to any profits made when you dispose of your assets.
For example, if you buy 2 Bitcoin for £2,000, then sell them for £10,000, your gain of £8,000 is subject to CGT.
The Tax-Free Allowance for the Year
The Annual Exempt Amount is a tax-free allowance that you have in the United Kingdom. The allowance for the 2024–2025 tax year is £3,000. This means you won’t owe CGT on gains less than this amount. However, if your total capital gains from all assets, including crypto, exceed £3,000, you must report the excess to HMRC and pay tax on it.
Let’s say you sell Ethereum for £6,000, and your initial purchase price was £3,000. Your gain would be £3,000. Since this is equal to your annual exemption, you wouldn’t owe any tax. However, if your gain was £5,000, the taxable amount would be £2,000, and you’d owe CGT on this. 
What is the amount of capital gains tax that you will pay?
How much you pay in capital gains tax (CGT) depends on your income tax range. If your total taxable income, including your crypto gains, falls within the basic income tax band (up to £50,270), you’ll pay:
- 10% on your capital gains
However, if your total taxable income, including your crypto gains, pushes you into the higher income tax band (over £50,270), your CGT rate will rise to:
- 20% on your capital gains
It’s important to note that certain gains, such as from the sale of residential property, can attract higher CGT rates, but for cryptocurrency, the general rates are 10% or 20%.
Let’s say you bought 1 Bitcoin for £4,000 and sold it for £8,000. Your capital gain is £4,000. Basic-rate taxpayers will pay £400 in CGT (10% of £4,000). The CGT will be £800 if you are a higher-rate taxpayer (20% of £4,000).
Which Records Must You Maintain?
Maintaining precise documentation is crucial when it comes to disclosing your cryptocurrency gains. HMRC expects individuals to track all their cryptocurrency transactions and record the following information for each transaction:
- Date of the transaction
- Amount of crypto involved
- The cryptocurrency’s value at the moment in GBP
- Transaction fees
- Wallet addresses and exchanges used (if applicable)
These records are vital in case HMRC decides to audit your crypto transactions. Many crypto traders use crypto tax software to automatically track their trades, while others may prefer to keep detailed spreadsheets. Whatever method you use, ensure that your records are comprehensive and up to date.
Reporting Your Crypto Gains
In the UK, you use the Self-Assessment tax return to record your capital gains. You must record your cryptocurrency earnings by January 31 of the following year. The tax year runs from April 6 to April 5. For example, if you sell crypto in the 2024/25 tax year, your tax return is due by 31 January 2026.
Make sure to include all relevant information about your crypto transactions in the Capital Gains Summary section of your Self-Assessment. You should report your crypto losses because you can use them to reduce your taxable gains.
Special Cases: Airdrops, Staking and NFTs
There are some additional rules regarding specific types of crypto activities. For example:
- Airdrops: If you receive tokens for free (e.g., from airdrops), you may need to pay CGT when you sell them.
- Staking Rewards: You usually pay income tax when you receive staking rewards, and you may also owe Capital Gains Tax when you sell them.
- NFTs: NFTs are treated like other crypto assets for tax purposes. CGT applies on the profit from the sale of an NFT.
These special cases can sometimes have different rules or tax treatments, so it’s always wise to consult a professional tax advisor, especially if your portfolio includes NFTs or staking rewards.
Why Is Cryptocurrency Taxed by HMRC?
Instead of treating cryptocurrencies as money, HMRC views them as a form of property. As a result, the government taxes crypto gains under the same rules as other types of property, such as shares, bonds, or real estate.The main goal is to ensure that individuals are paying their fair share of tax on assets that increase in value over time.
HMRC is actively ensuring that taxpayers include cryptocurrencies in their tax reports as crypto grows in popularity. There may be fines or interest associated with breaking tax laws.
Final Thoughts
Crypto Accountants can guarantee that you are completely in compliance with HMRC’s criteria and assist you in understanding the tax regulations.
Our expert accountants specialise in Crypto Tax and Advisory, regardless of your level of experience as a crypto investor. Contact Crypto Accountants today for a consultation.
FAQs
Do I have to pay Capital Gains Tax if I didn’t sell my crypto?
No, Capital Gains crypto tax only applies when you dispose of your crypto, such as by selling it, trading it, or using it to purchase goods or services. Simply holding crypto is not taxable.
What happens if I forget to report my crypto gains?
If you forget to report your crypto gains, HMRC may charge penalties and interest as per the crypto tax rules UK. They are increasingly scrutinizing crypto transactions, so it’s important to stay compliant.
Can I gift crypto to my spouse without paying tax?
It is tax-free to transfer cryptocurrency to your spouse or civil partner. However, you must still report the transaction as part of your tax return, but no tax will be due.
