The UK requires residents to pay taxes on cryptocurrencies, with guidelines provided by HMRC (HM Revenue and Customs). Depending on the transaction type, investors may be subject to income tax or capital gains tax. Below is a comprehensive breakdown of crypto taxation in the UK.
How Is Crypto Taxed in the UK?
Taxable events fall under two categories: capital gains tax and income tax.
Capital Gains Tax
Triggered by:
- Selling cryptocurrency
- Trading crypto for another asset
- Using crypto for purchases
Income Tax
Applies to:
- Mining income
- Staking rewards
- Referral/Airdrop rewards
Tax Rates in the UK
Cryptocurrencies are taxed under capital gains or income, with rates based on profit brackets:
Capital Gains Tax Rates
- 0% for profits ≤ £12,300 (annual allowance)
- 10–20% beyond the allowance
Income Tax Rates
- 0% up to £12,570 (personal allowance)
- 20–45% for higher earnings
Non-Taxable Crypto Transactions
The following activities do not trigger taxes:
- Holding long-term
- Transferring between wallets/exchanges
- Gifting to a partner/spouse
- Donations
- Purchasing crypto with GBP
Crypto Tax Allowances
- £12,300 capital gains tax-free allowance
- £1,000 miscellaneous income threshold
- Losses can offset gains indefinitely (no cap)
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Stolen/Lost Crypto
HMRC does not classify stolen crypto as capital losses. However, a negligible value claim may allow offsetting losses if recovery is impossible.
Can HMRC Track Crypto?
Yes. HMRC collaborates with exchanges via KYC data and monitors transactions since 2014.
Legal Tax Reduction Strategies
- Use Allowances: £12,300 (CGT) + £12,570 (income).
- Gift Crypto: Double allowances by gifting to a partner.
- Donate Crypto: Tax-deductible donations reduce liabilities.
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Paying Crypto Taxes in the UK
Calculation Steps
- Track taxable transactions.
- Categorize as income or capital gains.
- Subtract losses from profits.
Declaration Process
- File via Self Assessment Tax Return (SA100/SA108).
- Report income in Box 17.
FAQs
How is Cryptocurrency Taxed in the UK?
As income tax (mining/staking) or capital gains tax (trading/selling).
What Are the UK Crypto Tax Allowances?
- £12,300 CGT allowance.
- £1,000 income threshold.
Can I Avoid Crypto Taxes?
No, but strategies like gifting or donating reduce liabilities legally.
Is Staking Taxable?
Yes, rewards are taxed as miscellaneous income.
How Does HMRC Track Crypto?
Via exchange partnerships and KYC compliance.
Summary
UK crypto taxation hinges on income or capital gains, with bracket-based rates. Leverage allowances, losses, and gifts to minimize taxes. Always declare transactions to HMRC.