Cryptocurrency has become a popular form of investment, but now that it's attracting widespread attention, governments have been focusing on regulating it. Traders in the United Kingdom need to understand the latest crypto taxation laws for 2025. This guide covers how taxation works for crypto investors in the UK.
Crypto Taxation in the UK
Cryptocurrencies might be a new asset class, but they are taxed in the UK. If you engage in crypto trading, which means holding cryptocurrencies as a personal investment, then disposing of them and making a profit, you must pay a capital gains tax. On the other hand, if you earn crypto through mining or as a payment for your services, you need to pay an income tax.
According to the HM Revenue & Customs, cryptocurrencies are digital assets that can be divided into four main types. These include:
- Exchange tokens: These are used for payments and investments, like Bitcoin or Ethereum.
- Security tokens: These represent rights in a business, like profit claims or ownership.
- Utility tokens: These cryptos provide access to specific goods and services.
- Stablecoin: These are pegged to stable assets like fiat currency or gold to maintain value.
Capital Gains Tax for Crypto in the UK
In the UK, when you dispose of your cryptocurrencies, like selling, trading, or using them as a payment method, you need to check if you made a gain or loss. If it’s a loss, then it's tax deductible. But if it’s a gain, you need to consider whether the gain is below the annual tax-free allowance. If yes, your profit is tax-free. However, you must pay capital gains tax if the gain is above the tax-free allowance.
The annual tax-free allowance for the 2024/2025 tax year in the UK is £3,000, unlike the 2023/2024 tax year, which had an allowance of £6,000. So, gains up to £3,000 remain tax-free, but if they are above that, you need to pay a tax of 18% for gains up to £50,270 and 24% for income up to or over £150,000.
Capital gains tax is placed on transactions like selling crypto for fiat, swapping crypto, spending crypto, gifting crypto and selling NFTs. If you lose your crypto transaction, you can offset against your gains to reduce taxes.
Income Tax for Crypto in the UK
Suppose you gain your income from cryptoassets, like mining, staking, or payment for services. If you get paid in crypto, you must report the value of the cryptocurrency in pounds. Crypto mining and staking taxes can differ based on whether it is a professional or casual activity.
Mining is considered a business for professional activity, and profits are taxed under the income rules. But if your mining or staking is casual, earnings are taxed as miscellaneous income. The income taxes depend on the tax bracket.
- Up to £12,570: 0%
- Up to £50,270: 20%
- Up to £125,140: 40%
- Over £125,140: 45%
Crypto transactions that are subject to income tax include employee remuneration, staking and lending rewards, mining rewards, bounties, and liquidity mining rewards.
Reporting Your Crypto Taxes to HMRC
The UK's tax year goes from April 6 to April 5 the following year. The paper application deadline is October 31, after the tax year ends, while the online application is January 31, once the tax year ends. These are the deadlines for filing tax returns and paying taxes, including for cryptocurrency gains.
You need to use a self-assessment tax return to report your crypto taxes to HMRC. Follow the steps below:
- Register for the self-assessment on the HMRC website if you have not registered.
- Report all your gains and losses in the Capital Gains Summary pages.
- Submit your tax return online or file the paper returns by the deadline.
- Pay any tax that is due by the same deadline.
Frequently Asked Questions
Can HMRC Track Cryptocurrency?
HMRC can track crypto transactions and contact investors who don’t meet their tax obligations. It has a data sharing program with all UK exchanges and the KYC information you provided when you registered with the exchange or wallet.
Do You Pay Tax When You Sell Cryptocurrency in the UK?
Depending on your income, you pay taxes when you sell cryptocurrencies in the UK. When you sell crypto for fiat currency or another cryptocurrency, you will pay 10% or 20% on the profits from your sale and are subject to capital gains tax.
How Are Airdrops Taxed in the UK?
The HMRC says that you will pay income tax on airdrops. It considers airdrop income since you did something to earn it, like sharing a social media post. But if you receive them without doing a service or action, the airdrops are not considered income.
What Kind of Records Might HMRC Ask For?
The HMRC would ask for different details, such as the type of crypto asset, the date of the transaction, whether the assets were bought or sold, the value of the transaction in pounds, the number of units involved, the cumulative total of the investment units held, and your bank statements or wallet addresses.
Can You Avoid Paying Tax on Cryptocurrency in the UK?
If you want to reduce your crypto taxes, you need to make profits of less than £3000. Also, some transactions are not subject to tax, such as gifting it to a partner or charity, holding your cryptocurrency, buying crypto with fiat currency, and transferring your crypto between your accounts and wallets.
Follow Tax Laws for Crypto in 2025
If you invest in cryptocurrency while in the UK, following the tax laws is essential. The profits from selling crypto are subject to 18% to 24% capital gains tax, while the income from crypto, such as mining, staking, and services, can be subject to 0% to 45%. As for tax-free allowances, they include a £3,000 exemption for the 2024/2025 tax year. It is important to pay the taxes by the deadline and file your returns.
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