HMRC has been clear since 2018: cryptocurrency is not currency for UK tax purposes. It is a capital asset, and most transactions involving crypto are taxable events. Despite this, a significant proportion of UK crypto holders still do not declare their gains and income, and HMRC is actively pursuing this through data requests to exchanges and the crypto reporting framework that came into force in 2024.
This guide explains exactly what you owe HMRC on your crypto activities in 2026, how to calculate it, and how to report it correctly.
When Do You Owe Tax on Cryptocurrency?
You owe Capital Gains Tax when you:
- Sell cryptocurrency for fiat currency (pounds, euros, dollars)
- Exchange one cryptocurrency for another (e.g. swapping Bitcoin for Ethereum)
- Use cryptocurrency to pay for goods or services
- Gift cryptocurrency to someone other than your spouse or civil partner
You owe Income Tax and National Insurance when you receive cryptocurrency as:
- Payment for work or services (treated as employment or trading income)
- Mining rewards (treated as trading income if done as a business, or miscellaneous income if occasional)
- Staking rewards (treated as miscellaneous income, HMRC confirmed this in 2024)
- Airdrops, hard fork receipts, and DeFi lending rewards (income treatment depending on specifics)
How Capital Gains on Crypto Are Calculated
Each disposal creates a gain or loss. The gain is the sale price minus the acquisition cost (including any fees paid).
The UK uses a pooling system for CGT on cryptocurrencies:
Same day rule: If you buy and sell the same type of crypto on the same day, the purchase cost matches first against any same-day disposals.
Bed and breakfast rule (30 days): If you sell crypto and buy the same type back within 30 days, the cost of the repurchase is matched against the disposal, preventing straightforward loss-harvesting through immediate repurchase.
Section 104 pool: All other acquisitions of the same type of crypto are pooled. The average acquisition cost of the pool is used for each disposal.
This can make the calculation complex across many transactions. Purpose-built crypto tax software (Koinly, CryptoTaxCalculator, TaxBit) can import transaction data from exchanges and calculate gains automatically.
The Annual Exempt Amount and Rates
The CGT annual exempt amount is £3,000 in 2026/27. Gains below this level across all assets (not just crypto) are tax-free.
Gains above this are taxed at 18% (basic rate taxpayers) or 24% (higher/additional rate taxpayers) for residential property, but crypto follows the standard CGT rates: 10% (basic rate) or 20% (higher rate). Note: from October 2024, standard CGT rates were increased to 18% and 24% for most assets. Confirm the current rates with your accountant as these have been subject to change.
HMRC's Data Collection, Why You Cannot Hide
HMRC has been requesting user data from UK-accessible cryptocurrency exchanges since 2019. From January 2026, the OECD Crypto-Asset Reporting Framework (CARF) requires all major exchanges and platforms to automatically report user transaction data to tax authorities in their jurisdiction.
HMRC's Connect system cross-references exchange data against Self Assessment returns. If you have made significant crypto gains and not declared them, there is a growing probability that HMRC already has information about your transactions.
Making a voluntary disclosure before HMRC contacts you results in substantially lower penalties than being investigated.
Staking and DeFi, The Current HMRC Position
HMRC published updated guidance on DeFi (Decentralised Finance) in 2024. The key points:
Staking rewards received are treated as miscellaneous income when received, at the sterling value at the time of receipt. When the staking rewards are later sold, a separate CGT calculation applies on any further gain from the receipt value to the sale value.
DeFi lending and liquidity pool participation is complex, in some cases the transfer of tokens to a protocol is itself a disposal for CGT. HMRC's guidance acknowledges the complexity and promises further clarification. If you are active in DeFi, specialist advice is strongly recommended.
How to Report Crypto on Self Assessment
Crypto gains and income go on your Self Assessment tax return. Capital gains go on the Capital Gains Summary pages (SA108). Income from mining, staking, or employment in crypto goes on the relevant income pages.
If your total gains (before deducting the annual exempt amount) are over £50,000, or if you made over £50,000 in total disposals, you must complete the SA108 regardless of whether any CGT is due.
You may also need to file a 60-day CGT report if... actually no, the 60-day report is only for UK residential property disposals, not crypto. Crypto gains are reported through the annual Self Assessment return only.
Client A was a Wembley IT consultant who had been trading cryptocurrency since 2020 and had never declared any gains. By 2025, he had made total gains across four years of approximately £38,000, partially offset by losses of £9,000. Net taxable gains were £29,000. His liability after the four years of annual exemptions was approximately £4,800 in CGT plus interest.
He received a nudge letter from HMRC in early 2026. We prepared a full calculation using his exchange records and made a voluntary disclosure. HMRC accepted the figures. The penalty for careless non-disclosure with prompted disclosure and full cooperation came to 15% of the unpaid tax, approximately £720. Total cost: £5,520. Had he not come forward voluntarily after the nudge letter and been subject to a full investigation, the penalty could have been up to 30%, adding a further £1,440.
Frequently Asked Questions
Need help with your tax position?
Fixed fees, expert advice, no jargon. Serving Stanmore, Harrow, Wembley, Edgware and all of North West London.
Or email info@yourtaxhelp.co.uk | yourtaxhelp.co.uk