How is Crypto Taxed in the UK 2025-26: An In-depth Guide
- MAZ
- Jul 1, 2023
- 16 min read
Updated: Sep 18
Getting Your Crypto Tax Basics Spot On
Straight to it: In the 2025–26 tax year (6 April 2025 to 5 April 2026), HMRC treats crypto much like other investments. You’re either paying Capital Gains Tax (CGT) when you dispose of crypto, or Income Tax if you earn it through work, mining, staking, or similar.
The tricky bit? Many taxpayers don’t realise how these two interact — or that simply swapping tokens, without cashing out to pounds, is enough to trigger a taxable event. Let’s strip this down to plain English with some hard numbers, so you know exactly where you stand.
How Capital Gains Tax Applies to Crypto in 2025–26
HMRC tightened the rules over the last few years. The annual CGT allowance — once a healthy £12,300 — is now just £3,000. That means if your total crypto gains (plus gains on shares, property, etc.) exceed £3,000 in the year, you’ll pay CGT on the excess.
The rate depends on your income tax band:
● 18% for basic rate taxpayers
● 24% for higher or additional rate taxpayers
That’s a big jump from what many people still believe — I’ve had clients assume it’s 10% or 20% across the board, which hasn’t been the case since April 2023.
UK Income Tax Bands for 2025–26 (England, Wales & NI)
Band | Taxable Income | Rate |
Personal Allowance | Up to £12,570 | 0% |
Basic Rate | £12,571 – £50,270 | 20% |
Higher Rate | £50,271 – £125,140 | 40% |
Additional Rate | Over £125,140 | 45% |
Important detail: the Personal Allowance tapers off once your income exceeds £100,000 and disappears completely above £125,140. That alone can push you into higher tax unexpectedly if you’ve had a good year in crypto.
Don’t Forget Scotland’s Twist
If you’re based in Scotland, it’s a whole different story. Scottish taxpayers face five rates between 19% and 48%, with lower thresholds than the rest of the UK. I’ve had Edinburgh clients caught out because they assumed the same rates as England applied — only to discover their crypto gains dragged them into the higher “Advanced” and “Top” bands. Always check the Scottish tables on GOV.UK before filing.
Why These Numbers Matter in Practice
Picture this: you earn £55,000 from your day job. On paper, you’re a higher-rate taxpayer. If you also make £5,000 profit from selling Bitcoin, only the first £3,000 is tax-free. The remaining £2,000 is taxed at 24%, costing you £480.
Now, compare that to someone on £30,000. They’d still pay CGT, but only at 18% — £360 on the same gain. That’s a £120 difference for identical crypto activity, all because of your day job pushing you into a higher band.
Case Study: Alice, the Freelance Designer in Bristol
Alice dabbled in Ether and a few altcoins, swapping tokens rather than selling them. She assumed no tax was due until she withdrew to GBP. But HMRC rules are clear: every swap is a disposal.
By February 2026, her cumulative gains from swaps hit £4,500. She hadn’t filed a return, believing no “cash-out” meant no liability. When HMRC’s systems cross-checked exchange data, she was flagged for under-reporting. Result? Late filing penalty plus interest on unpaid tax.
Lesson: Don’t wait until you sell back to pounds. Keep track of GBP values at the moment of each swap.
The Cost Basis Rule (Explained with a Cuppa)
Think of your crypto holdings like a jar of tea bags — a mix of different purchases. HMRC doesn’t let you pick and choose which bag you use when you make a cuppa (dispose of tokens). Instead, you work out the average cost per tea bag.
So, when you sell or swap a token, you deduct the average pooled cost from the disposal proceeds. It’s called share pooling.
I once worked with a landlord in Manchester who moved coins between wallets and assumed each “bag” kept its own cost. When HMRC reviewed his return, they disagreed — and the correction cost him several thousand pounds.
Income Tax on Crypto: More Than Just PAYE
Now, not all crypto falls under CGT. If you receive it through:
● Employment (salary in crypto)
● Mining or staking rewards
● Airdrops linked to services you provide
…it’s classed as income, taxed at your marginal rate (20%, 40% or 45%, or Scottish equivalents). Later, when you eventually sell or swap those same tokens, you’ll face CGT on top. Yes, double-layered tax — one for getting it, another for getting rid of it.
What’s Missing in Most Online Guides (That You Need to Know)
Most blogs stop at “crypto is taxed like shares.” But in practice, you’ll also need to:
● Handle multiple income streams — PAYE job, side hustle in crypto, maybe rental income. HMRC looks at the lot together.
● Track regional differences — Welsh and Scottish taxpayers don’t follow the same banding.
● Check interaction with benefits — for example, the High Income Child Benefit Charge kicks in if income exceeds £50,000, even if that’s only because of a crypto disposal.
Calculating Your Crypto Tax: Real-World Checks & Tools
None of us loves tax surprises, but here’s how to avoid them: you need to work out whether HMRC sees your crypto activity as a capital gain, as income, or sometimes both. Getting this wrong is the most common reason I see clients receive unexpected brown envelopes from HMRC.
So, let’s go step by step.
Step 1: Know When Crypto is Taxable
According to HMRC, crypto becomes taxable when you either:
● Dispose of it (selling, swapping, spending, or gifting — apart from to your spouse). HMRC cryptoassets manual
● Earn it (salary in crypto, mining, staking, or certain airdrops). Income Tax: Tax when you get cryptoassets
I often remind clients: even if you don’t convert to pounds, HMRC wants you to use the sterling value at the time of the transaction.
Step 2: Work Out Your Income Tax Position First
Your overall tax position depends on where your income bands fall. Crypto income simply sits on top of your salary, dividends, rental income, and so on.
Check the current year’s Income Tax rates and bands here:
● Scottish Income Tax
Why start with income? Because it decides whether your gains fall into the 18% CGT bracket (basic rate) or the 24% bracket (higher or additional rate).
Step 3: Work Out Capital Gains Using HMRC’s Pooling Method
Every disposal means working out:
Proceeds – the sterling value of what you received.
Allowable costs – mainly the pooled cost of your tokens (purchase price + certain transaction fees).
Gain or loss = proceeds – costs.
The detailed pooling rules are here: Capital Gains Tax: Shares and securities – HMRC helpsheet HS284 (crypto is treated the same way).
Remember: the annual exempt amount is £3,000 for 2025–26 (HMRC CGT allowance). If your total gains across all assets are above that, you’ll need to pay.
Step 4: Check Your Tax Position Online
Too many people still rely on paper P60s and rough calculations. These days, your best tool is your HMRC Personal Tax Account.
Log in here: HMRC Personal Tax Account
Once inside, you can:
● See your PAYE income details.
● Check your tax code.
● View any underpayments carried forward.
● Report additional income (including crypto) via Self Assessment.
Step 5: Reporting Through Self Assessment
If your total taxable gains exceed £3,000, or your crypto income isn’t already taxed at source, you must file a Self Assessment return.
Register here if you don’t already file: Register for Self Assessment
Key deadlines:
● 31 October 2026 – paper return deadline.
● 31 January 2027 – online filing and payment deadline.
When filling in your return, you’ll use:
● The Capital Gains summary (SA108) for disposals.
● The Self Employment pages (SA103) if you’ve earned crypto through mining or staking. All forms are here: Self Assessment forms and help sheets.
Step 6: Watch for High Income Child Benefit Charge
One common trap I see is the High Income Child Benefit Charge (HICBC). If your total income exceeds £50,000 — even if it’s only because of a crypto gain — you may need to repay some or all of your Child Benefit.
More details: Child Benefit tax charge
Step 7: Special Cases — Scotland and Wales
● Scotland: Extra bands mean more people slip into higher tax rates sooner. Double-check your banding here: Scottish Income Tax
● Wales: At present, Wales uses the same rates as England and NI, but it has devolved powers, so always check: Welsh Income Tax
Step 8: Avoiding Penalties
HMRC can and does obtain data from crypto exchanges. Failing to report disposals or income is classed as an inaccuracy on your return. Penalties vary depending on whether HMRC believes you’ve been careless, deliberate, or deliberately concealed income.
Check HMRC’s guide: Penalties for inaccuracies in returns
Real-World Example: Darren, Contractor from Leeds
Darren had a PAYE day job (£42,000) plus contracting work paid partly in stablecoins. His crypto income (£8,000 equivalent) pushed him above £50,270. That made all his crypto gains taxable at 24% CGT instead of 18%. He also had to pay Class 4 NICs on the crypto income via Self Assessment.
Had Darren checked his Personal Tax Account earlier in the year, he could have set money aside and avoided a nasty bill in January.
Checklist Before You File
List all disposals – sales, swaps, gifts, spending.
Note GBP values at the date of each transaction.
Calculate pooled cost and gains/losses.
Check total against £3,000 allowance.
Add crypto income on top of your PAYE or self-employed earnings.
Log into your Personal Tax Account and cross-check details.
File via Self Assessment if above the thresholds.
Review Child Benefit entitlement if income crosses £50,000.
Advanced Crypto Tax Scenarios for Business Owners and Complex Cases
Now, let’s think about your situation if you’re not just a casual investor. Maybe you’re running a limited company, or perhaps your employer pays you in crypto. These edge cases create more tax headaches than any other, and most clients who come to me for help have already tripped up at least once.
When Crypto is Earned Through Employment
If your employer pays you in Bitcoin or any other crypto, HMRC treats it like a non-cash payment. The sterling value at the date you receive it is subject to Income Tax and National Insurance Contributions (NICs) just as if it were cash.
● PAYE rules for employers: Expenses and benefits: non-cash payments
● NIC thresholds and rates: National Insurance rates and categories
Employers must report it through payroll, and employees must ensure it’s included in their earnings. Later, if you sell the same tokens, you’ll face Capital Gains Tax as well. That’s double exposure, so keeping precise records is essential.
Crypto Through Self-Employment or Business Activity
If you mine, stake, or trade crypto regularly and with commercial intent, HMRC may class it as a trading activity. That means profits are taxed as trading income, not capital gains.
● Trading income rules: Tax when you set up as a sole trader
● Corporation Tax for companies: Corporation Tax rates and allowances
I’ve advised contractors who ran staking operations in limited companies. Their staking rewards were declared as trading income for Corporation Tax, then dividends were taxed when withdrawn personally. The benefit was being able to deduct business expenses, such as electricity and hardware costs, provided they were wholly and exclusively for the trade.
Claiming Allowable Expenses Against Crypto Income
If crypto activity is classed as trading, you can deduct allowable expenses such as:
● Electricity costs for mining rigs.
● Equipment used solely for mining or staking.
● Exchange fees directly linked to trading.
The golden rule: costs must be wholly and exclusively for business use. HMRC guidance:
Expenses if you're self-employed
Be careful here — I’ve seen people try to claim broadband or rent in full when only a fraction is related to their crypto activity. That kind of over-claim can trigger penalties.
Rare Case: Emergency Tax on Crypto Salary
Here’s a situation that caught one of my clients out. He received a lump sum payment in crypto from a new employer. Because his tax code wasn’t updated in time, PAYE applied an emergency tax code.
The over-deduction only became clear when he logged into his Personal Tax Account. He was able to reclaim the overpaid tax, but it took almost a year to resolve.
The lesson: always double-check your tax code if you’re paid in crypto. More on tax codes here: Check your tax code.
High Income Child Benefit Charge and Crypto
The High Income Child Benefit Charge (HICBC) applies if your income exceeds £50,000, and it increases gradually until it cancels out the entire Child Benefit at £60,000.
Crypto gains or income can push you over the line, even if you weren’t expecting it. More details here: Child Benefit tax charge.
I’ve seen families blindsided when crypto profits meant they had to repay Child Benefit for the whole year. Plan ahead: if your income is close to £50,000, keep an eye on the effect of even small gains.
Record Keeping: The Foundation of Compliance
HMRC expects you to keep detailed records of every crypto transaction. This includes:
● Type of tokens.
● Date of transactions.
● Amounts in tokens and GBP.
● Bank statements and wallet addresses.
● Costs (fees, exchange charges).
Official guidance: Record keeping for cryptoassets
Without this, you’re in dangerous territory. If HMRC investigates, lack of evidence can lead to estimated assessments — and they rarely come out in your favour.
When to Seek Professional Help
Crypto taxation can quickly become complex if you:
● Run multiple wallets across different platforms.
● Earn crypto as well as trade it.
● Operate as a business or limited company.
● Live in Scotland with non-standard bands.
In these cases, it’s worth getting a professional accountant experienced in digital assets. But even then, your responsibility as the taxpayer remains the same: you must ensure your return is accurate.
Summary of Key Points
Crypto is taxed as income or capital gains. Income arises when you earn it; CGT applies when you dispose of it.
The CGT allowance for 2025–26 is £3,000. Anything above this is taxable at 18% or 24% depending on your income band.
Income Tax bands differ across the UK. Scotland has its own structure, with rates up to 48%.
Employer payments in crypto are subject to PAYE and NICs. Later disposals are also liable for CGT.
Trading activity may be taxed as income. Regular mining or staking can count as self-employment or company trading.
Allowable expenses reduce taxable profits. But they must be wholly and exclusively for the business.
Emergency tax can apply if tax codes are wrong. Always check your code if receiving crypto salary.
Child Benefit may be clawed back if income exceeds £50,000. Crypto gains can unexpectedly push you into the High Income Child Benefit Charge.
Record keeping is mandatory. Keep transaction histories, GBP values, and supporting evidence.
Use your Personal Tax Account and Self Assessment. Official HMRC tools allow you to track, calculate, and report liabilities correctly.
How a Personal Tax Accountant Can Assist with Crypto Tax in the UK
As the world of cryptocurrency continues to evolve, so does its tax implications. In the UK, the HM Revenue and Customs (HMRC) has clear guidelines on how crypto assets are taxed. However, the complexity of these guidelines can be overwhelming for many. This is where a personal tax accountant can step in to help. Here's how.
Understanding Crypto Tax Regulations
The first way a personal tax accountant can assist is by helping you understand the complex tax regulations surrounding cryptoassets. They can explain the HMRC's stance on cryptoassets, how they are classified, and what tax implications they carry. This includes understanding the difference between trading and investing in crypto, and how each is taxed differently.
Calculating Capital Gains and Losses
One of the main tax implications of dealing with crypto assets is capital gains tax. When you sell, trade, or dispose of your crypto assets, you may be liable for capital gains tax on any profits. A personal tax accountant can help you calculate these gains or losses accurately. They can guide you on how to track the cost basis of your crypto assets, calculate the gain or loss on each transaction, and aggregate these amounts for your tax return.
Filing Your Tax Return
Filing a tax return can be a daunting task, especially when it includes crypto transactions. A personal tax accountant can help you navigate this process. They can assist you in filling out the necessary forms, such as the Self-Assessment Tax Return (SA100) and the Capital Gains Summary (SA108). They can also ensure that you meet all deadlines to avoid penalties.
Minimising Your Tax Liability
A personal tax accountant can provide advice on how to minimise your tax liability. This could involve strategies such as utilising your tax-free allowance, offsetting losses against future gains, or structuring your transactions in a tax-efficient manner. However, it's important to note that tax evasion is illegal, and any strategies suggested by your accountant should be within the boundaries of the law.
Keeping Up-to-Date with Changes
Tax laws and regulations can change frequently, and staying up-to-date can be challenging. A personal tax accountant can help you stay informed about any changes to crypto tax laws and regulations. This ensures that you are always compliant with the latest rules and can make informed decisions about your crypto investments.
Record Keeping
Good record-keeping is essential for accurate tax reporting. A personal tax accountant can guide you on what records to keep, how to keep them, and for how long. This includes records of all your crypto transactions, the fair market value at the time of each transaction, fees incurred, and any other relevant information.
Peace of Mind
Perhaps the most significant benefit of hiring a personal tax accountant is the peace of mind it brings. Knowing that a professional is handling your taxes can alleviate stress and allow you to focus on your crypto investments.
In conclusion, a personal tax accountant can be a valuable ally in navigating the complex world of crypto tax. They can help you understand regulations, calculate gains and losses, file your tax return, minimise your tax liability, keep up-to-date with changes, maintain records, and ultimately, provide peace of mind.
FAQs
Q1: Can someone check if their tax code is wrong because of crypto income?
A1: In my experience, the key is to log into your HMRC tax account and compare your recorded PAYE income with any crypto you’ve received as earnings. If crypto income has bumped up your earnings but hasn’t altered your code, you’ll be underpaying tax. It’s a common mix-up—especially for freelancers paid partly in crypto—so flag it early to avoid year-end surprises.
Q2: What if someone earns crypto from staking and then gives it away—does that create both income and disposal tax points?
A2: Well, it’s worth noting that staking rewards are treated as income on receipt, and gifting them (if not to a spouse) is a disposal. You could face Income Tax first, then CGT on the gain from when you received them. I’ve seen this catch gig-workers by surprise when they transfer rewards to friends.
Q3: Can someone with two simultaneous PAYE jobs underpay tax on crypto if they don’t consider both incomes?
A3: It happens more than you’d think. If both taxable incomes from two PAYE roles push you into the higher-rate band, your crypto gains might slip into that 24% CGT rate. Always aggregate incomes before working out your tax.
Q4: How does this affect someone receiving a pension and earning crypto?
A4: Good question—pension income counts in your total taxable income. If crypto receipts, especially income-type rewards, push you over thresholds like £50,000 or higher-rate bands, you may unexpectedly breach thresholds like HICBC, or lose part of your personal allowance.
Q5: If someone moves from England to Scotland mid-year, how should they treat different tax bands for crypto gains?
A5: You’ll need to proportion your total income and crypto gains across each residency period and apply the appropriate Scottish bands for the relevant portion. I once helped a client in Dundee do this correctly, rather than use a flat single-band approach—that saved several hundred pounds.
Q6: What if someone’s crypto-paying employer sends payments late and tax codes jump in?
A6: In my experience, late crypto-salary payments may trigger emergency tax codes. If that happens, use your Personal Tax Account to get the overpaid tax back. Keep records of when the crypto was earned versus paid—HMRC will need that breakdown.
Q7: Can someone use a capital loss from crypto to reduce tax on their day-job income?
A7: Not quite—capital losses can only offset future capital gains, not income. So while they can soften future CGT bills, they won’t cushion higher-rate Income Tax from salary or crypto income.
Q8: What if someone earns crypto on DeFi platforms—do they need to register for self-assessment if it’s under £1,000?
A8: The miscellaneous income allowance is £1,000. If your DeFi income plus staking and mining stay under that, you're off the hook. But once you cross it, you must register for Self Assessment, even if it’s just for crypto bits.
Q9: Can side-hustle crypto without proper records lead to penalties?
A9: Absolutely—it’s one of the easiest ways to stumble. HMRC’s receiving data from exchanges, and if your records are patchy, you may face estimated assessments, often at higher rates. Keep a timestamped export of all transactions—even if you use software—to stay ahead.
Q10: How do emergency tax codes from crypto-paid tips or service tokens work?
A10: If you’re tipped in tokens on a platform and HMRC treat that as employment income, you might be on an emergency tax code until properly logged. I had a client who received tipping rewards, then discovered they’d been taxed flat-rate until the next PAYE update—so always check early.
Q11: Can someone self-employed use crypto income to claim a trading loss against their non-crypto business income?
A11: If HMRC treats your crypto activity as a trade, yes—you can offset losses against other self-employment profits from the same year. But if it’s personal investing gains, it stays in the CGT world and can’t cross-offset.
Q12: What happens if someone withdraws crypto rewards into fiat—does value change affect tax?
A12: Once you’ve paid Income Tax on crypto at the value when received, any later disposal (even into fiat) is a CGT event based on the difference from that valued receipt. So dramatic volatility between reward and withdrawal can mean significant tax on gains or losses.
Q13: Can a business owner deduct crypto costs like cloud-mining fees?
A13: Yes, if crypto mining or staking is declared as a trade. In that case, energy or cloud service fees can be deductible, provided they’re clearly separated from personal use. I’ve helped a couple of small businesses nail that distinction and save a chunk.
Q14: If someone accidentally misses crypto on one return, can they amend it later?
A14: Certainly—and it’s always the smarter move. You have up to a year to amend if it’s a genuine oversight. I once had a client add crypto gains three weeks before HMRC sent a nudge and avoided a penalty because we amended proactively.
Q15: Could multiple tiny crypto disposals slip under radar but still add up to over-payments?
A15: Definitely. Say someone spends 10 tiny transactions of £5 each—most think "no big deal." But when aggregated in GBP terms, they can exceed the £3,000 allowance and go unnoticed. My tip? Always track every single micro-spend as you go.
Q16: How can someone juggling crypto and foreign exchange report conversions correctly?
A16: Use the precise pound-value on the day of each swap, even if base crypto is non-sterling. My practice includes telling clients: “If it’s not quoted in GBP, convert on the timestamped rate,” or HMRC will estimate—and you’ll lose precision.
Q17: Can someone’s high crypto valuation crater mid-year affect their tax estimates?
A17: Sadly, no. HMRC taxes based on the value at each event. Even if your crypto plummets later, that earlier income or gain stays taxable at the time received or disposed. Only future losses help, not retroactive market shifts.
Q18: What if someone’s spouse gifts crypto—does that count, and how to record it?
A18: Gifts between spouses are EMI-free in cash, but not always in crypto—HMRC doesn’t recognise crypto as money for spouse relief. It’s treated as a normal disposal, so you should log GBP values and file accordingly. I had a couple mistakenly assume it's free of tax—only HMRC set them straight later.
Q19: Can someone pay CGT via payment on account from crypto gains?
A19: Yes — if you’re registering for Self Assessment, you may need to make payments on account based on the prior year’s crypto & other gains. It’s worth budgeting early; I often help clients project next-Jan numbers so they’re not caught out.
Q20: How does remote work and living abroad intersect with crypto tax obligations?
A20: Let’s say you moved abroad but still sell your crypto while UK-resident for part of the year. You must apportion gains for your residency period. I guided a digital nomad client through a split-year computation that saved them thousands—and avoided double-charging.
Comments