NFTs — Tax Treatment
How HMRC taxes minting, buying, selling, and earning royalties on non-fungible tokens.
NFTs — Tax Treatment
NFTs (non-fungible tokens) are treated as crypto assets by HMRC. The same CGT rules apply as for any other token.
Key Tax Events
| Activity | Tax Treatment |
|---|---|
| Creating (minting) an NFT | Not a taxable event in itself (similar to creating any other asset) |
| Selling an NFT | Disposal → CGT on gain (proceeds minus cost of creation/acquisition) |
| Buying an NFT with crypto | Disposal of the crypto used to pay → CGT event on the crypto |
| Royalties received on secondary sales | Likely Income Tax as miscellaneous income |
| Gifting an NFT | Disposal at market value → CGT (except to spouse/civil partner) |
Minting Costs
When you mint an NFT, the costs associated with minting (gas fees, platform fees) form the acquisition cost of the NFT. These are allowable expenditure under s.38 TCGA 1992 when you later dispose of it.
Buying With Crypto — The Double Event
Many people overlook this: buying an NFT with ETH involves two tax events:
- Disposal of ETH — you are spending ETH, which is a disposal. Gain/loss on the ETH must be calculated.
- Acquisition of the NFT — the NFT's acquisition cost is the GBP value of the ETH at the time of purchase.
Creator Royalties
If you create an NFT and earn royalties from secondary sales:
- The royalties are likely miscellaneous income subject to Income Tax.
- The cost basis for the NFT you originally created is your minting costs.
- Each royalty payment is a separate income event.
NFT Collections and Pooling
Unlike fungible tokens, NFTs are unique — they are not pooled in a Section 104 pool. Each NFT is tracked individually with its own cost basis.
HMRC CRYPTO10100 — NFTs fall within HMRC's definition of crypto assets.
Explain Like I'm 5
An NFT is like a one-of-a-kind drawing you made. Making the drawing is free, but if you sell it, you might owe the government some of the money you earned. If you buy someone else's drawing using your digital coins, that counts as spending your coins too. And if people keep reselling your drawing and you get a little cut each time, that is like earning pocket money and the government wants to know about it.
Key Takeaways
- NFTs are crypto assets — all standard CGT rules apply.
- Minting is not taxable, but minting costs form the acquisition cost for later disposal.
- Buying an NFT with crypto is two events: disposal of the crypto AND acquisition of the NFT.
- Creator royalties from secondary sales are likely Income Tax as miscellaneous income.
- Each NFT is tracked individually — they are not pooled like fungible tokens.
Educational only - not financial advice