Crypto Tax UK: How HMRC Taxes Bitcoin and Cryptocurrency

HMRC treats cryptocurrency as property, not currency. That single classification drives everything. Every time you dispose of crypto, whether by selling, swapping, spending, or gifting it, you have a potential Capital Gains Tax event. The same £3,000 annual exempt amount applies as it does to shares or any other capital asset.

How the gain is calculated

Your gain is the disposal proceeds minus what you paid. The complication is how HMRC wants you to work out your cost. You must use Section 104 pooled cost basis: a running average cost per coin across all your purchases of that token. Two matching rules override the pool and catch people out.

First, the same-day rule: if you buy and sell the same token on the same day, those transactions are matched directly, not against your pool.

Second, the 30-day rule: if you sell a token and buy the same token back within 30 days, the re-purchase is matched against the sale before the pool is touched. This kills the "bed and breakfasting" strategy. Selling at a loss and buying back within a month does not crystallise a usable loss.

When income tax applies instead

Not all crypto receipts are capital. If you receive crypto as payment for work, mining rewards, staking rewards, or airdrops linked to existing holdings, HMRC taxes that as miscellaneous income at your marginal rate in the year you receive it. The market value at the point of receipt is your income figure, and it also becomes your cost basis for CGT when you eventually sell.

Record-keeping and HMRC's reach

HMRC has data-sharing agreements with exchanges and uses blockchain analytics tools. Every transaction needs a record: the date, the amount in sterling at that point, what you paid or received, and any fees. DeFi interactions count too. If your records are incomplete, your cost basis calculation will be wrong, and HMRC will use the information it has to assess a gain.