Cryptoassets are not regulated financial products so please be aware that trading them carries a considerable amount of risk for your capital. Cryptocurrencies are also not covered by existing consumer protection laws and are not suitable for the majority of investors.
As a non-traditional asset, you might overlook paying tax associated with crypto activities. Doing so could leave you with an unexpected bill and a potential HMRC fine, so it’s important to be aware of what tax you might be liable for.
As crypto becomes more common, regulations around these assets are changing and could affect you in the future. Keeping an eye on the changes could help you avoid surprises. Tax rules for cryptoassets are complex, and you might benefit from seeking specialist advice.
Cryptoassets could be liable for Income Tax, Capital Gains Tax, and Inheritance Tax
While crypto is often described as a digital or virtual currency, from a tax perspective, it is treated like shares, rather than cash. As a result, buying, selling, and holding crypto could attract a tax charge.
Income Tax
In some circumstances, you will need to pay Income Tax on crypto earnings.
If you’re paid in crypto, your income may be liable for Income Tax and National Insurance contributions. If you make money from mining crypto, whether you’re operating as a business or as a hobby, you might need to pay Income Tax on your earnings.
In addition, if you’re frequently trading large amounts of crypto, HMRC may consider you a trader. This would mean you pay Income Tax on trading profits rather than Capital Gains Tax (CGT). However, this is unusual for a typical crypto investor.
Capital Gains Tax
CGT is the type of tax that crypto investors will most commonly need to consider.
You may be liable for CGT when you sell or dispose of certain assets, including crypto, and make a profit.
Each tax year, you have a tax-free allowance, known as the “Annual Exempt Amount”. In 2026/27, this is £3,000 for individuals. You will only pay CGT if your total gains, including from other assets, are above this threshold. As a result, spreading out the disposal of assets could be a way to manage tax efficiency.
If CGT is due, the rate you pay depends on which tax band(s) the taxable gains fall into when added to your other income. In 2026/27:
- If you’re a higher- or additional-rate taxpayer, the rate would be 24% on your gains from chargeable assets.
- If you’re a basic-rate taxpayer, depending on your taxable income and the size of your gain, you might benefit from a lower CGT rate of 18% on chargeable assets.
Inheritance Tax
Under UK tax law, crypto is treated as property. This means when someone passes away, their cryptoassets will be included in their estate for Inheritance Tax (IHT) purposes.
The standard rate of IHT is 40%, so it could significantly reduce the value of assets you inherit or leave behind for loved ones.
If you hold cryptoassets and the total value of your estate is above the nil-rate band (£325,000 in 2026/27), you may benefit from creating an estate plan. An estate plan could help you organise and manage the distribution of your assets after death, including considering how to do so tax-efficiently.
Keeping accurate tax records is essential
You can pay the tax due on crypto gains by reporting them to HMRC, either via a Self Assessment tax return or by using the organisation’s real-time CGT service.
You must keep accurate records of your gains and disposals when investing in crypto. HMRC states that you must keep separate records of each transaction, including the:
- Type of tokens
- Date you disposed of them
- Number of tokens you’ve disposed of
- Number of tokens you have left
- Value of the tokens in pound sterling
- Bank statements
- Pooled costs before and after you disposed of them.
HMRC can audit your tax returns up to four years after the deadline, but in some circumstances the time limit can be longer, including up to 20 years for deliberate tax evasion.
Contact us
If you have questions about your current tax position and how to manage your liability tax-efficiently, please contact us.
Please note:
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
Cryptoassets are not regulated financial products so please be aware that trading them carries a considerable amount of risk for your capital. Cryptocurrencies are also not covered by existing consumer protection laws and are not suitable for the majority of investors.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
The Financial Conduct Authority does not regulate tax planning, Inheritance Tax planning or estate planning.