How UK Crypto Tax Works in 2025
If you own cryptocurrency in the UK, you’re probably already paying tax on it-even if you didn’t realize it. The UK doesn’t treat crypto like cash. It treats it like property. Every time you sell, trade, spend, or even gift it, you might owe tax. And since October 2024, the rules got a lot stricter. The annual tax-free allowance for capital gains dropped from £6,000 to just £3,000. That means if you made £3,001 in profit from selling Bitcoin, Ethereum, or any other crypto, you now owe tax on the full £3,001. No more wiggle room.
What Counts as a Taxable Event?
You don’t need to cash out to trigger tax. HMRC considers almost any movement of crypto a disposal. Selling crypto for pounds? Taxable. Trading Bitcoin for Ethereum? Taxable. Buying a coffee with Dogecoin? Taxable. Giving crypto to a friend? Taxable. Even swapping one token for another on a decentralized exchange counts. The only exceptions? Transferring crypto between your own wallets (like from Coinbase to Ledger) and gifting to your spouse or civil partner.
That last one trips up a lot of people. One Reddit user in February 2025 shared how he gifted £4,000 worth of ETH to his brother, thinking it was harmless. He ended up owing £240 in capital gains tax because it exceeded the £3,000 allowance. It’s not about intent-it’s about the value at the time of the gift.
Capital Gains Tax: Rates and Allowance
For the 2024/2025 and 2025/2026 tax years, your first £3,000 of crypto profits are tax-free. Everything above that is taxed at either 18% or 24%. Basic-rate taxpayers (income up to £50,270) pay 18%. Higher and additional-rate taxpayers (income over £50,270) pay 24%. These rates went up from 10% and 20% after the October 2024 Autumn Budget. That’s a 80% increase in the top rate for crypto.
Let’s say you bought 1 BTC for £30,000 in 2023 and sold it for £50,000 in March 2025. Your profit is £20,000. You subtract the £3,000 allowance. That leaves £17,000 taxable. If you’re a basic-rate taxpayer, you owe £3,060 (18% of £17,000). If you’re a higher-rate taxpayer, you owe £4,080 (24% of £17,000). No deductions. No exceptions. Just the math.
Income Tax: Mining, Staking, and Airdrops
Not all crypto income is capital gains. If you earn crypto through mining, staking, or receiving airdrops, it’s treated as income. That means it gets added to your total income for the year and taxed at your marginal rate: 20%, 40%, or 45%. The personal allowance is £12,570 for 2024/2025. So if you earned £15,000 in ETH from staking, you’d pay 20% on £2,430 (the amount over £12,570), and 40% on anything above £50,270.
Unlike capital gains, you can’t use losses from selling crypto to reduce your income tax. If you made £10,000 from staking and lost £8,000 trading, you still pay income tax on the full £10,000. The loss only helps if you make a profit later on a sale or trade.
How to Track Your Transactions
HMRC doesn’t care if you’re using Binance, Coinbase, or Uniswap. You must track every single transaction: when you bought, how much you paid, when you sold, how much you got, and the fees. That includes every small swap. One user on Reddit spent 40 hours manually logging 500+ transactions for their 2024/2025 return. That’s not uncommon.
You need to record:
- Date and time of each acquisition and disposal
- Amount of crypto bought or sold
- Value in GBP at the time of the transaction
- Transaction fees paid
- Wallet addresses involved
Many people use tools like Koinly, CoinTracker, or Blockpit to automate this. In 2025, 62% of UK crypto investors used tax software-up from 38% in 2023. These tools pull data from exchanges and calculate your cost basis, gains, and losses using HMRC’s matching rules.
The Same-Day and 30-Day Rule
HMRC has a complex system called the ‘same-day rule’ and ‘bed and breakfasting’ rules. If you buy and sell the same crypto on the same day, the gain or loss is calculated using the purchase price from that day. If you buy crypto and sell it within 30 days, HMRC forces you to match the sale with the most recent purchase. This stops people from selling at a loss and rebuying immediately to claim a tax benefit.
It’s confusing. One trade can trigger multiple matching rules. That’s why manual tracking is nearly impossible for anyone with more than 50 transactions. The average time to file a crypto tax return with 200+ transactions is over 42 hours, according to GoForma’s 2025 guide. Most people who do it themselves end up making mistakes.
What Happens If You Don’t Report?
HMRC is no longer guessing. Since 2022, they’ve been collecting data from 47 UK crypto exchanges-up from just 12. By January 2026, all exchanges will be legally required to report user transaction data directly to HMRC. That includes your purchase history, sales, and even wallet addresses.
If you’ve been ignoring your crypto taxes, you’re at risk. HMRC has already launched targeted campaigns. They send letters to people who’ve traded over £1,000 but haven’t filed. Penalties can be up to 100% of the tax owed, plus interest. In 2024, HMRC processed 98.2% of crypto-related tax returns within 12 weeks. They’re not slow. They’re watching.
What’s Changing in 2026?
The biggest change coming is mandatory reporting by exchanges. Starting January 2026, platforms like Binance, Coinbase, and Kraken must send HMRC your full transaction history. You won’t be able to hide activity. If you bought crypto in 2024 and never reported it, HMRC will know.
There’s also talk of a ‘de minimis’ rule-exempting small transactions under £1,000. But as of February 2026, it’s still just a proposal. Don’t count on it. The Financial Conduct Authority (FCA) also approved crypto exchange-traded notes (ETNs) in October 2025. That means you might soon be able to invest in crypto through a Stocks & Shares ISA, up to the £20,000 annual limit. If that happens, gains inside the ISA would be tax-free. But that’s a future possibility, not a current benefit.
What You Should Do Now
1. Export your transaction history from every exchange and wallet you’ve used since 2014. Even if you didn’t think you owed tax, keep it.
2. Use tax software. Tools like Koinly or CoinTracker cost £50-£150 a year. That’s cheaper than a penalty.
3. File your Self-Assessment by January 31, 2026, for the 2024/2025 tax year. Use the SA108 form for capital gains.
4. Don’t guess. If you’re unsure whether a transaction was taxable, assume it was. HMRC doesn’t care if you didn’t know the rules. Ignorance isn’t a defense.
Common Mistakes to Avoid
- Thinking gifting crypto to family is tax-free (it’s not, unless it’s your spouse)
- Believing you don’t owe tax if you didn’t convert to pounds (trading crypto for crypto is taxable)
- Using FIFO (first in, first out) without checking HMRC’s matching rules
- Forgetting to include transaction fees in your cost basis
- Waiting until the last minute to gather records
The UK’s crypto tax system isn’t designed to be friendly. It’s designed to catch everyone. The days of treating crypto like a tax-free side hustle are over. The rules are clear. The deadlines are firm. And HMRC has the data to prove it. If you’re holding crypto in the UK, you’re already in the tax system. The only question is whether you’re ready for it.
Do I pay tax on crypto I haven’t sold?
No. You only pay tax when you dispose of crypto-sell it, trade it, spend it, or gift it. Holding crypto without selling or trading it doesn’t trigger a tax event. But if you earn crypto through staking or mining, that’s income and must be reported even if you don’t sell it.
Is swapping Bitcoin for Ethereum taxable?
Yes. HMRC treats exchanging one cryptocurrency for another as a disposal. You must calculate the gain or loss based on the value of the Bitcoin when you bought it and the value of the Ethereum when you received it. Even if you didn’t convert to pounds, you still owe capital gains tax if your profit exceeds the £3,000 allowance.
Can I use crypto losses to reduce my income tax?
No. Capital losses from crypto sales or trades can only be used to offset future capital gains. They cannot be used to reduce income tax from staking, mining, or wages. If you made £10,000 from staking and lost £8,000 trading, you still pay income tax on the full £10,000.
What happens if I don’t report my crypto gains?
HMRC now receives transaction data from 47 UK crypto exchanges and will soon get full reports from all platforms by January 2026. If you don’t report, they’ll find you. Penalties can reach 100% of the tax owed, plus interest. In 2024, HMRC sent out thousands of letters to unreported crypto traders. Ignorance is not accepted as an excuse.
Do I need to report small transactions under £1,000?
Yes. There is no official £1,000 exemption as of February 2026. Even if you only made £500 from trading, you must report it if it’s a disposal. HMRC’s £3,000 allowance applies to your total annual gains, not per transaction. So ten £500 trades still count as £5,000 in total gains-meaning you owe tax on £2,000 after the allowance.
Can I use an ISA to avoid crypto tax?
Not yet. As of February 2026, you cannot directly buy crypto inside a Stocks & Shares ISA. However, the FCA approved crypto exchange-traded notes (ETNs) in October 2025, which could allow indirect crypto investment through ISAs in the future. If that happens, gains inside the ISA would be tax-free up to the £20,000 annual limit. But this is not available today.
