Understanding how cryptocurrency is taxed in the UK is essential for anyone buying, selling, or earning digital assets. The UK’s tax authority, HMRC (Her Majesty’s Revenue and Customs), treats crypto as property rather than currency, meaning profits and income from crypto are subject to taxation. This guide breaks down the current crypto tax framework for the 2024 tax year, covering Capital Gains Tax, Income Tax, and other relevant taxes—so you can stay compliant and make informed financial decisions.
How Is Crypto Taxed in the UK?
In the UK, cryptocurrency taxation falls under two main categories: Capital Gains Tax (CGT) and Income Tax. The type of tax you pay depends on how you acquired or used your crypto.
- Capital Gains Tax applies when you sell, gift, exchange, or otherwise dispose of crypto and make a profit.
- Income Tax applies when you receive crypto as payment for goods or services, through mining, staking rewards, airdrops, or other forms of income.
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Capital Gains Tax on Cryptocurrency
Capital Gains Tax is levied on the profit you make when disposing of cryptocurrency—not the total amount received. Disposal includes selling for fiat (e.g., GBP), trading for another cryptocurrency, gifting to someone other than a spouse, or using crypto to purchase goods or services.
The CGT rate you pay depends on your total taxable income and which income tax band you fall into.
2024/2025 Capital Gains Tax Rates
For the 2024/2025 tax year (April 6, 2024 – April 5, 2025), the rates are as follows:
Basic Rate Taxpayers
- Taxable income: £12,571 – £50,270
- CGT rate on crypto: 10%
Higher and Additional Rate Taxpayers
- Taxable income: Over £50,271
- CGT rate on crypto: 20%
Note: Unlike some assets (like residential property), there’s no separate rate for higher earners on crypto gains—everyone above the basic rate pays 20%.
Annual Exempt Amount (Tax-Free Allowance)
Each tax year, you receive a tax-free allowance on capital gains. For 2024/2025, this is £3,000—down from £6,000 in 2023/2024.
This means you can make up to £3,000 in total capital gains across all assets (including stocks and crypto) without paying any CGT.
Any unused allowance cannot be carried forward. If you exceed the limit, only the amount above £3,000 is taxed.
Example: Calculating Capital Gains Tax
Let’s say you’re a higher-rate taxpayer earning £65,000 annually. You sell Bitcoin you bought earlier in the year and realize a gain of £12,000.
- Subtract the tax-free allowance: £12,000 – £3,000 = £9,000 taxable gain
- Apply the 20% CGT rate: 20% × £9,000 = £1,800
You would owe £1,800 in Capital Gains Tax on your crypto disposal.
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Income Tax on Cryptocurrency
If you receive cryptocurrency as payment or through income-generating activities, it’s subject to Income Tax based on its value in GBP at the time of receipt.
Your crypto income is taxed according to your marginal income tax band.
2024/2025 Income Tax Rates (England & Northern Ireland)
| Band | Income Range | Tax Rate |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic Rate | £12,571 – £50,270 | 20% |
| Higher Rate | £50,271 – £125,139 | 40% |
| Additional Rate | Over £125,140 | 45% |
Note: These bands apply to total taxable income after personal allowances and deductions.
Scottish Income Tax Differences
If you’re a Scottish resident, different bands apply:
- Starter Rate: 19% (up to £14,876)
- Basic Rate: 20% (£14,877–£26,561)
- Intermediate Rate: 21% (£26,562–£43,662)
- Higher Rate: 42% (£43,663–£75,000)
- Advanced Rate: 45% (£75,001–£125,140)
- Top Rate: 48% (over £125,140)
Always confirm your residency status with HMRC to ensure correct reporting.
Types of Taxable Crypto Income
1. Employment Income
If your employer pays you in crypto, it’s treated like a regular salary. The employer must report it via PAYE (Pay As You Earn), deducting Income Tax and National Insurance. You should keep records of the date and GBP value at receipt.
2. Self-Employment Income
Freelancers or contractors paid in crypto must report it as self-employed income. Include it in your Self Assessment tax return and deduct allowable business expenses (e.g., hardware, software).
3. Miscellaneous Income
This includes:
- Mining rewards
- Staking rewards
- Airdrops
- Play-to-earn game earnings
These are taxed at your marginal income tax rate based on the GBP value when received.
Example: Income Tax on Crypto Earnings
You’re a freelance developer earning £38,000 annually. You complete a project and receive £7,000 worth of Ethereum.
- Total income: £45,000 (still within the basic rate band)
- Income tax due on crypto: 20% × £7,000 = £1,400
You must report this on your Self Assessment return.
Other Taxes That May Apply
While CGT and Income Tax cover most scenarios, other taxes could come into play depending on how you use your crypto.
Value Added Tax (VAT)
Under UK law and the CJEU Hedqvist ruling, trading or selling crypto is VAT-exempt. However:
- If you use crypto to buy goods or services, VAT applies to the product, not the payment method.
- For example: Buying a £1,200 laptop with Bitcoin incurs 20% VAT (£240) on the laptop—same as paying in cash.
Businesses accepting crypto must charge VAT normally and account for it in their returns.
Inheritance Tax (IHT)
Cryptocurrency is considered an asset for Inheritance Tax purposes. If the total value of an estate exceeds £325,000, IHT applies at 40% on the excess.
Key points:
- The market value of crypto on the date of death determines its worth.
- Transfers to a spouse or civil partner are exempt.
- Donating at least 10% of the net estate to charity reduces IHT to 36%.
- Executors must pay IHT within six months of death.
Proper estate planning—including secure access to private keys—is crucial for heirs to claim digital assets.
Frequently Asked Questions (FAQs)
Q: Do I pay tax if I just buy crypto with GBP?
A: No. Simply purchasing cryptocurrency with fiat currency is not a taxable event. Tax only applies when you sell, trade, or earn crypto.
Q: Are NFTs taxed like other crypto?
A: Yes. HMRC treats most NFTs as cryptoassets. Buying/selling NFTs triggers CGT; creating and selling them may trigger Income Tax.
Q: What records should I keep for crypto taxes?
A: Keep transaction dates, GBP values at time of transaction, purpose of transaction (e.g., investment vs. business), wallet addresses, and receipts for fees or expenses.
Q: Can I offset crypto losses against gains?
A: Yes. You can use capital losses from failed investments to reduce your taxable gains. Report losses on your Self Assessment to carry them forward.
Q: Is staking taxed as income or capital gain?
A: Staking rewards are treated as income when received. Future gains when selling staked coins are subject to CGT.
Q: Do I need to report small transactions?
A: Yes. All disposals count—even small trades or purchases. However, if your total gains are below the £3,000 allowance (for 2024/25), you may not owe tax.
Final Thoughts
Navigating HMRC’s crypto tax rules requires attention to detail—but staying compliant doesn’t have to be overwhelming. Whether you’re trading occasionally or earning income through decentralized platforms, understanding your obligations helps avoid penalties and optimizes your tax position.
With the annual tax-free allowance dropping to £3,000 in 2024/25, more people will fall into taxable territory. Now more than ever, accurate recordkeeping and strategic planning are key.
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