UK Crypto Taxes in 2025: A Complete Guide

As cryptocurrency adoption continues to surge, understanding your tax obligations has become increasingly crucial—and the United Kingdom is no exception. Determining which activities are taxable and navigating UK tax laws can be complex, especially as HMRC—the UK’s tax authority—has significantly ramped up its focus on digital assets. 

Whether you’re trading Bitcoin, earning through staking, or exploring the world of DeFi protocols, your crypto activities could trigger capital gains tax, income tax, or, in some cases, both.

In this comprehensive guide, we’ll break down everything you need to know about UK crypto taxes. From identifying taxable activities and understanding how taxes are calculated to providing expert tips for managing your tax obligations, we've got you covered. Let’s dive in!

Can the HMRC Track Crypto?

As the cryptocurrency landscape continues to evolve, HMRC has stepped up its game in monitoring and regulating crypto activities across the UK. But given that crypto's very DNA is rooted in anonymity, you might be wondering—how does HMRC even know you own cryptocurrency?

One of HMRC’s most powerful tools is the implementation of KYC (Know Your Customer) protocols across all UK-based cryptocurrency exchanges. For those unfamiliar, KYC is a process where exchanges verify your identity during account creation, requiring detailed personal information like your name, address, and identification documents. This effectively links every transaction back to an individual, stripping away much of the anonymity that many associate with crypto.

Moreover, HMRC has established data-sharing agreements with major centralised exchanges (CEXs) operating in the UK. These agreements grant HMRC access to transaction histories, user identities, and other critical data stretching back as far as 2014. In practical terms, this means that even if you transfer your assets to a hot or cold wallet, HMRC can still trace those funds back to you if they were initially acquired via a centralized exchange. Non-compliance with these regulations is no joke and can result in steep fines—or worse, imprisonment.

What If I Forgot to Report Crypto Taxes?

If you’ve missed reporting your crypto gains, don’t worry– HMRC offers Voluntary Disclosure Service (VDS). This service allows crypto holders to come forward and declare any unpaid taxes on their assets proactively. You can do so without incurring penalties, as long as you act before HMRC discovers the oversight. 

Capital Gains Tax: Rates and Cost Basis 

Unlike some jurisdictions, the UK doesn’t have a dedicated tax category for cryptocurrencies. Instead, crypto assets are treated as chargeable assets, similar to shares, for tax purposes. This means any disposal—be it selling, trading, spending, or gifting—may trigger CGT obligations. Let’s break down how CGT applies to your crypto activities.

What Counts As A Disposal?

In the UK, disposal of crypto assets occurs in several scenarios:

• Selling Crypto for Fiat: Converting crypto to GBP or any other fiat currency.
   
• Trading Crypto for Crypto: Swapping one cryptocurrency for another, including stablecoins.
   
• Spending Crypto: Using crypto to pay for goods or services.
   
• Gifting Crypto: Donating crypto to someone other than your spouse or civil partner.
   

Each of these actions could result in a capital gain or loss, depending on the difference between the asset’s value at disposal and its cost basis.

Capital Gains Tax Rates and Allowances

The amount of CGT you owe depends on your income tax band. Below are the rates for the 2024–2025 tax year:

• Annual Exempt Amount: Each individual has a CGT exemption of £3,000 for 2024–2025. Gains below this threshold are tax-free and do not need to be reported.
   
• Recent Changes: As of Oct. 30, 2024, CGT rates increased to 18% and 24%, up from 10% and 20%. Any disposals made after this date will be taxed at the new rates.

Cost Basis Rules: Share Pooling

Understanding your cost basis is essential for accurately calculating your capital gains or losses when disposing of crypto assets. The cost basis represents the original value of your crypto asset, including any associated fees, and determines the profit or loss when you sell, trade, or otherwise dispose of it. By clearly defining the cost basis, you can avoid overpaying or underreporting your taxes.

The UK employs the share pooling method to calculate the cost basis of crypto assets. This approach groups together the cost of all assets of the same type into a single pool, ensuring a fair and standardised calculation for tax purposes. Share pooling also prevents manipulation of capital gains through strategies like wash sales, where investors sell and repurchase the same asset within a short time to create artificial losses.

Here are the key share-pooling rules:

1. Same-Day Rule:
   
   
   1. If you buy and sell the same cryptocurrency on the same day, you must use the cost basis of that day to calculate your gain or loss.
       
   2. Example: If you purchase 1 BTC for £80,000 on April 1st and sell it later that day for £85,000, the cost basis is £80,000, resulting in a £5,000 gain.
       
2. Bed and Breakfast Rule:
   
   
   1. If you sell a crypto asset and repurchase the same asset within 30 days, the cost basis for the sale is the cost of the new purchase.
       
   2. Example: You sell 1 BTC for £80,000 on April 1st and buy another for £82,000 on April 15th. The cost basis for the April 1st sale is £82,000, not the original purchase price.
       
3. Section 104 Rule:
   
   
   1. For all other scenarios, calculate the average cost basis of all purchases of the same type of asset in your pool.
       
   2. How to Calculate:
      
      
      1. Add the total purchase costs of the assets in your pool.
          
      2. Divide by the total quantity of assets to find the average cost basis per unit.
          
   3. Example: If you own 2 BTC purchased for £80,000 and £85,000, the total cost of £165,000 is divided by 2, resulting in an average cost basis of £82,500 per BTC.

Reporting and Offsetting Losses

Not all investments yield profits, but losses can reduce your CGT liability. Here’s how to handle them:

Offsetting Losses

• Losses can be deducted from your gains, reducing the taxable amount to within the Annual Exempt Amount (£3,000 for 2024–2025). If your losses exceed your gains, you can carry them forward for up to four years, provided they’re registered with HMRC.
   
• Example: Suppose you made a £15,000 gain from selling crypto this year but had a registered loss of £5,000 from the previous year. By offsetting last year’s loss, your remaining gain is reduced to £10,000.

Crypto Income Tax

While capital gains tax covers profits from disposing of crypto assets, certain activities are classified as income in the UK and are subject to income tax. For crypto investors, understanding when cryptocurrency is treated as income is crucial for full compliance with HMRC regulations and optimising tax obligations.

When is Crypto Treated as Income?

Cryptocurrency is taxed as income in the UK under specific circumstances. These scenarios typically involve earning crypto through various activities rather than merely swapping or trading it. Here are the primary instances where crypto is considered income:

• Payment in Crypto ("Money’s Worth"): Receiving cryptocurrency as payment for goods, services, or employment. Such payments are subject to both income tax and national insurance.
• Staking Rewards: Rewards earned through staking crypto can be classified as income, depending on the terms of the arrangement.
• Mining Tokens: Income from mining activities is taxable, with its classification depending on whether it’s a hobby or a business.
• Airdrops: Tokens received via airdrops are treated as income if they require an action or service in return.
• DeFi Income: Returns from activities like lending, yield farming, or liquidity mining may be classified as income, based on the nature of the transactions.

HMRC Guidance on DeFi Transactions

HMRC evaluates DeFi transactions based on their nature, treating many returns as income. Key considerations include:

• Nature of the Transaction:
  
  
  • Income: Returns from activities like staking, yield farming, and lending are often considered income, especially if they are agreed upon, paid periodically, or provided by the DeFi platform.
     
  • Revenue: Transactions that involve disposing of crypto assets, such as adding or removing liquidity from pools, are typically treated as revenue transactions and subject to Income Tax.

Examples of Crypto Income

Common crypto activities that generate taxable income include:

• Yield Farming: Earning new crypto tokens or interest through yield farming on platforms like AAVE or Compound Finance is considered income.
   
• Liquidity Mining: Rewards earned from providing liquidity to pools, including governance or reward tokens, are treated as income.
   
• Referral Rewards: Programs like Binance Referral, Coinbase Learning Center, or CoinMarketCap Learning Center offer rewards that are classified as income.
   
• Engage-to-Earn Platforms: Platforms that reward users with crypto for engaging in activities, such as watching videos or browsing the internet, are likely to be considered income-generating.
   
• Play-to-Earn Games: Earning tokens through games like Axie Infinity is subject to Income Tax.
   
• Shop-to-Earn Extensions: Browser extensions like Lolli that reward users with crypto for shopping activities are treated as income.

Income Tax Rates and Allowances

The UK uses a progressive income tax system. For 2024–2025, the rates and thresholds are:

• Personal Allowance: The first £12,570 is tax-free but is eliminated entirely for incomes above £125,140.

Calculating Crypto Income

To calculate your crypto income, determine the fair market value in GBP at the time you received the crypto. Here’s how:

• Determine Value: Use the market price of the crypto on the day it was received.
   
• Keep Records: Document the date, amount, and type of crypto received for every transaction.

Example: You earn £4,000 in additional income from various crypto investments. With an annual income of £42,000, you fall within the Basic Rate tax band. After applying the Personal Allowance of £12,570, your taxable income is £29,430. The £4,000 of crypto income is taxed at 20%, resulting in a £800 tax liability.

Tax Loss Harvesting

Tax loss harvesting is a smart strategy UK crypto investors can use to legally minimise their tax liabilities. By selling underperforming assets strategically, you can offset gains from other investments and reduce your overall tax bill.

What is Tax Loss Harvesting?

Tax loss harvesting, or tax loss selling, involves selling crypto assets at a loss to offset capital gains from other investments. Given crypto’s volatility, this can be an effective method of reducing your tax obligations.

1. Sell or Trade at a Loss: Create a capital loss by selling or trading a crypto asset below its cost basis.
    
2. Offset Gains with Losses: Use the capital loss to offset gains from other investments, lowering your taxable income.
    
3. Carry Forward the Loss: If your losses exceed your gains, you can carry the unused portion forward to future tax years.

Matching Gains with Losses

HMRC permits offsetting capital losses against capital gains if specific conditions are met. For example, you can sell one crypto asset at a loss to balance out gains from another, reducing your taxable income.

Example:

You purchased Ethereum at £700 and Bitcoin at £30,000. Now, Bitcoin has dropped to £28,000, while Ethereum has risen to £2,500.

• Gains: Selling Ethereum: £2,500 - £700 = £1,800 gain.
   
• Losses: Selling Bitcoin: £28,000 - £30,000 = £2,000 loss.

By selling Bitcoin at a £2,000 loss, you offset the £1,800 Ethereum gain, resulting in no taxable gain and an additional £200 loss to carry forward.

Carrying Forward Unused Losses

If losses exceed gains in a given year, you can carry the remainder forward to offset future gains:

• Offset Future Gains: Apply unused losses to gains in subsequent years.
   
• Register Losses: File them with HMRC within four years of the tax year they occurred.

Reporting Crypto Taxes

Accurately reporting your cryptocurrency taxes is crucial for staying compliant with HMRC regulations and avoiding hefty penalties. Whether you’ve profited from trading, earned income through staking, or engaged in DeFi activities, understanding the reporting process is essential. Fortunately, there are ways to bypass the complexities of manual tax filing, saving you countless hours and unnecessary frustration.

Relevant Forms for UK Crypto Tax

If you want to go the manual reporting route, you’ll need to complete specific HMRC forms as part of your Self Assessment Tax Return:

• SA100 - Self Assessment Tax Return: This form is used to report all sources of income, including crypto-related earnings. Whether you’ve earned income through staking, mining, or received cryptocurrency as payment, it must be detailed in your SA100.
   
• SA108 - Capital Gains Summary: This supplementary form is for reporting capital gains and losses from disposing of crypto assets. It provides a detailed breakdown of all disposals, ensuring accurate calculation of your Capital Gains Tax. 

The forms required will depend on the types of crypto activities you’ve undertaken during the tax year.

When Are Taxes Due?

In the UK, cryptocurrency taxes must be reported and paid as part of your Self Assessment Tax Return. Here are the key deadlines to keep in mind:

• End of the Tax Year: The UK tax year runs from April 6th to April 5th of the following year. Ensure you have all your records in order by the end of the tax year to accurately calculate your crypto taxes.
   
• Filing Deadline (Online Returns): The deadline to file your Self Assessment Tax Return online is January 31st of the following year. For example, for the 2024–2025 tax year, you must file your return by January 31, 2026.
   
• Payment Deadline: Taxes owed must also be paid by January 31st to avoid interest or penalties.

Manual Filing vs. Crypto Tax Software

Filing taxes manually can be time-consuming and error-prone, especially if you’re managing a high volume of transactions. Crypto tax software simplifies the process by:

• Automatically calculating gains and losses.
   
• Generating the necessary HMRC forms.
   
• Integrating with your crypto exchanges and wallets to track transactions seamlessly.

Using crypto tax software not only ensures greater accuracy but also saves you valuable time. Let’s explore some tools that can streamline your tax reporting process and make compliance hassle-free.

Best Crypto Tax Software

If you’re looking for our full analysis of the best crypto tax software in 2025, you can check it out here. For this article, we’ll focus on three of the most popular options in the market.

Koinly

Koinly is a powerful crypto tax software designed for both tax reporting and portfolio tracking. It supports over 20 countries, including the U.K., and integrates with more than 25,000 cryptocurrencies, 220 blockchains, and 420 exchanges.

Koinly has all the necessary tax forms, which users can submit directly to their tax authorities. Additionally, it matches transfers between exchanges and personal wallets. This ensures that your transactions are tracked correctly and that you aren’t taxed multiple times on transfers between your own accounts, a common issue when handling multiple wallets and exchanges.

Koinly offers both free and paid plans, accessible to users with varying needs. While the free plan provides essential tools for tracking and reporting, paid plans offer more advanced features such as automated tax forms. Pricing for paid tiers starts at $49 for the Newbie plan (100 transactions), $99 for the Hodler plan (1,000 transactions), and $179 for the Trader plan (3,000+ transactions).

We also have a detailed guide on Koinly, which you can check out here.

CoinLedger

CoinLedger is highly regarded crypto tax software that simplifies tax reporting by integrating with over 350 exchanges, 181 DeFi platforms, and popular wallets like MetaMask, Trust Wallet, and Exodus. Designed to handle both cryptocurrency and NFT tax reporting, CoinLedger automates the generation of tax forms, making it easy for users to submit accurate reports to tax authorities.

For traders and investors who want to keep an eye on their portfolios, CoinLedger also offers a portfolio tracking tool. Users can monitor their profits and losses, track holding periods, and view tax liabilities as they occur throughout the year.

CoinLedger offers a free version that allows users to import their transaction history and calculate their net capital gains and losses. However, if one wishes to generate full tax reports, they’ll need to choose from one of CoinLedger’s paid plans. Pricing starts at $49 for the Hobbyist plan (100 transactions), $99 for the Investor plan (1,000 transactions), and $199 for the Unlimited plan, which supports unlimited transactions.

CoinTracking

CoinTracking bills itself as a leader in cryptocurrency reporting and tracking, with over 1.8 million users. It stands out with its detailed portfolio tracking and tax reporting capabilities, making it trusted by both individual investors and institutions. The platform supports over 300 exchanges and offers 25 customisable reports for insights into profits, losses, and tax liabilities.

CoinTracking is particularly detailed, allowing users to know exactly how their portfolio is performing, how diversified they are, and what their tax burden is going to be throughout the year. The platform's robust analytics also include historical data on over 32,000 coins, providing deep insights into trading history and tax impacts.

CoinTracking offers a free plan with essential features like tracking up to 200 transactions and generating capital gains reports. For more advanced users, paid plans include the Pro plan at $12.99 per month (3,500 transactions), the Expert plan at $19.99 per month (up to 100,000 transactions), and the Unlimited plan at $54.99 per month for unlimited transactions. These paid options provide features like automatic imports from exchanges, CSV exports, advanced tax tools, and priority customer support.

We also have an in-depth guide on CoinTracking, along with a 10% discount when you sign up using our special offer.

Strategies to Minimise Crypto Taxes

Now that you understand your tax obligations, there are several strategies that crypto investors can use to legally reduce their tax burden. Before diving into more thorough explanations, here’s a brief table summarising the key strategies:
 

Now let’s explore these strategies in more detail:

Utilise Tax-Free Thresholds

HMRC provides two valuable allowances to help minimise your tax liability: the Annual Exempt Amount and the Personal Allowance. The Annual Exempt Amount for the 2024–2025 tax year is £3,000, allowing gains below this threshold to be tax-free and unreportable. The Personal Allowance, on the other hand, lets you earn up to £12,570 in income tax-free. However, it reduces incrementally for incomes above £100,000 and is completely eliminated at £125,140. Strategically managing your gains and income within these limits can significantly reduce the taxes you owe.

Harvest Losses to Offset Gains

If your crypto investments have underperformed, tax loss harvesting can help you lower your tax bill. By selling assets at a loss, you create capital losses that can offset gains from other investments. If your losses exceed your gains, the remaining losses can be carried forward to offset gains in future tax years. 

Claim Trading and Property Breaks

If you earn small amounts from trading or property-related crypto activities, HMRC offers specific allowances to help reduce your taxable income. The Trading Allowance exempts the first £1,000 of earnings from reporting, and the Property Allowance works similarly for property-related income. For earnings exceeding £1,000, these allowances can still be used to offset a portion of your taxable income. 

Invest in Pension Funds

Contributing to pension schemes like SIPPs (Self-Invested Personal Pensions) or ISAs (Individual Savings Accounts) offers significant tax advantages. SIPPs allow your crypto investments to grow tax-free, deferring taxation until retirement when withdrawals are taxed. ISAs provide an opportunity to shelter gains and income from taxes altogether, within specific annual contribution limits. Both options are excellent tools for long-term tax planning and wealth accumulation.

Donate Crypto to Charity

Donating cryptocurrency to a registered charity is a win-win for reducing taxes and supporting a cause. When you donate crypto, it’s exempt from Capital Gains Tax (CGT), meaning you can give away appreciated assets without a tax bill. Additionally, you can claim a charitable deduction equal to the fair market value of the donation, further reducing your taxable income.

Gift Crypto to a Partner

Transferring crypto assets to a spouse or civil partner is a smart tax-saving strategy. Gifts between spouses or civil partners are exempt from CGT, allowing you to transfer assets without triggering a taxable event. By sharing assets, both individuals can use their Annual Exempt Amounts (£3,000 each for 2024–2025), effectively doubling the tax-free threshold to £6,000 per year.

Leverage EIS or SITR Investments

Government-backed schemes like the Enterprise Investment Scheme (EIS) or Social Investment Tax Relief (SITR) provide substantial tax incentives. With EIS or SITR, you can defer CGT, enjoy income tax relief, and benefit from tax-free growth if you hold your investment for at least three years.

Closing Thoughts

Managing your cryptocurrency taxes in the UK can sometimes feel overwhelming. However, now that you understand the importance of maintaining accurate records, meeting filing deadlines, and distinguishing between capital gains and income tax, you can confidently tackle your tax reporting.

To simplify the process further, consider using crypto tax software, which can automate calculations and streamline reporting. If you have a sizable portfolio, consulting a crypto-savvy accountant could also be a smart investment. While this might come with a cost, the benefits often outweigh the expense. After all, there are numerous nuances that could affect your specific situation—details that go beyond the scope of this guide.