In the UK, cryptocurrencies such as Bitcoin and Ethereum are not treated like cash. Instead, HMRC classifies them as assets. This means that whenever you sell, swap, or spend your crypto, you may have to pay Capital Gains Tax.
It’s important to understand that tax applies not only when you convert your crypto into pounds sterling. Exchanging one cryptocurrency for another, for example, swapping Bitcoin for Ethereum, is also a taxable event. Using crypto to pay for goods or services similarly triggers tax, as does gifting crypto to someone other than your spouse or civil partner.
Calculating what you owe requires detailed record-keeping. You need to track the value of your crypto in pounds at the time of every transaction, including any fees you paid and the original purchase price. The annual Capital Gains Tax allowance for 2025/26 is £3,000, so if your total gains exceed this, you will need to report and pay tax on the amount above it.
If you receive cryptocurrency as income, for example through mining, staking rewards, or as payment for work, HMRC treats this as taxable income. The value of the crypto at the time you receive it is subject to Income Tax and National Insurance. Later, if you sell or exchange those assets, any further profits may also be subject to Capital Gains Tax.
Also See: UK Tax Allowances & Reliefs
HMRC^ requires you to keep detailed records for every crypto transaction, including dates, values in pounds, and any associated costs. Without accurate records, you risk making errors that could lead to penalties.
Starting in January 2026, crypto exchanges and wallet providers will be obliged to report user data directly to HMRC under the Cryptoasset Reporting Framework. This will increase transparency and make it harder to avoid paying tax on crypto gains.
The rules may feel cumbersome, but ignoring them is a gamble no investor should take.
For anyone holding Bitcoin, Ethereum, or any other crypto in the UK, it is important to understand the tax rules, keep good records, and seek professional advice when needed. The sector is still evolving, but compliance is non-negotiable.