If you’ve bought, sold, traded or earned cryptocurrency in the UK, this question usually arrives late at night, slightly panicked, usually followed by a frantic Google search.
You’re not alone.
Crypto tax in the UK is widely misunderstood, and many people only start looking into it when something feels off, a deadline is approaching, or a letter from HMRC lands on the doormat.
This guide explains when crypto is taxable in the UK, what HMRC actually cares about, and what you should do next if you’re unsure.
The short answer: yes, crypto can be taxable
Cryptocurrency is not tax-free in the UK.
HMRC treats cryptoassets as taxable assets, which means certain activities can trigger tax. Whether you actually owe anything depends on what you’ve done, how much, and your personal circumstances.
The two main types of tax involved are:
Capital Gains Tax (CGT)
Income Tax
Let’s break that down properly.
When do you pay Capital Gains Tax on crypto?
Capital Gains Tax usually applies when you dispose of crypto.
A “disposal” doesn’t just mean cashing out to pounds. HMRC considers the following as disposals:
Selling crypto for GBP or another fiat currency
Trading one cryptocurrency for another (e.g. Bitcoin to Ethereum)
Spending crypto on goods or services
Gifting crypto to someone outside your spouse or civil partner
If your total gains across the tax year exceed the annual CGT allowance, Capital Gains Tax may be due.
This is one of the most common surprises people face. Many assume that switching coins or holding profits “on an exchange” avoids tax. It doesn’t.
When does Income Tax apply to crypto?
Income Tax can apply if crypto is earned, rather than invested.
Common examples include:
Mining crypto
Staking rewards
Airdrops
Getting paid in crypto for work or services
In these cases, the value of the crypto received is usually treated as income at the point you receive it, even if you never cash it out.
This area is particularly easy to get wrong, especially when income and capital gains overlap.
Does HMRC actually know about my crypto?
Increasingly, yes.
Crypto exchanges and platforms are under growing pressure to share data with tax authorities. HMRC has also been sending targeted “nudge letters” to individuals they believe may have undeclared crypto activity.
Relying on the idea that “they’ll never know” is becoming a risky strategy.
What about crypto tax software?
Crypto tax software such as Koinly can be a helpful starting point. It can aggregate transactions and estimate gains.
However, software alone does not:
Decide whether something is income or capital
Check if transactions have been categorised correctly
File your tax return with HMRC
Protect you if figures are wrong
We regularly see reports that look fine on the surface but contain errors that could cause problems later.
Common crypto tax mistakes we see
Here are a few issues that come up again and again:
Assuming crypto-to-crypto trades aren’t taxable
Forgetting about older wallets or exchanges
Misclassifying staking or airdrops
Submitting software reports without a review
Not declaring anything because “it was only a small amount”
Individually, these mistakes might seem minor. Combined, they can lead to penalties, amended returns, and unnecessary stress.
What should you do if you’re unsure?
If you’ve traded, earned, or moved crypto and you’re not completely confident it’s been handled correctly, the best step is to get it reviewed properly.
At Crypto Tax Solution, we:
Review your crypto activity and reports
Identify what is actually taxable
Handle the HMRC submission for you
Give you clear answers, not jargon
No scare tactics. No guesswork. Just clarity and compliance.
Final Thoughts
Crypto tax doesn’t have to be overwhelming. Most people don’t get into trouble because they’ve done something wrong, but because they’ve done nothing at all.
If you’d rather have peace of mind than unanswered questions, we’re here to help.
👉 You can find out more about our crypto tax services here
(or book a review and let us take it off your plate)
