Crypto tax catches a lot of people out. If you have sold, swapped or spent cryptocurrency, you may owe capital gains tax, and HMRC now receives information directly from the platforms you use. Gains above the £3,000 tax-free allowance, known as the annual exempt amount, are taxable, and swapping one coin for another counts as a disposal, not just selling for pounds. If you have not declared gains in past years, it is better to put that right yourself before HMRC gets in touch.
Watch Graham talk this through: see the video on LinkedIn
Why HMRC knows about your crypto
From 1 January 2026, cryptoasset platforms based in the UK have had to collect details of their users and their transactions under the Cryptoasset Reporting Framework. They must send the first reports to HMRC by 31 May 2027, covering the 2026 calendar year, and then every year after. The information includes who you are and a summary of what you have bought, sold and swapped. Platforms in other countries that have signed up to the same rules report to their own tax authority, which shares the details with HMRC.
HMRC already uses information from exchanges to write to people it believes have undeclared gains, and it has sent tens of thousands of these letters in recent years. The new reporting gives it far more.
Graham’s view is simple: the Revenue is getting more information from more places all the time, so assume it can see your crypto.
When do you pay tax on crypto?
For most individuals, cryptocurrency is treated like any other investment. You pay capital gains tax when you dispose of it at a gain. Disposing of it means parting with it in any way, not only selling it. A disposal includes:
- selling crypto for pounds
- swapping one cryptoasset for another, for example Bitcoin for Ethereum
- using crypto to pay for goods or services
- giving it away, other than to a spouse, civil partner or charity
The one people miss is the swap. As Graham puts it, as soon as you exchange one coin for another you have made a capital gain or a capital loss, even though no money has reached your bank.
Buying crypto with pounds is not a disposal, and nor is moving it between wallets you own. Holding crypto while its value rises does not create a tax bill either. The gain is only taxed when you dispose of it.
Crypto you receive from staking, mining or as payment for work is usually taxed as income rather than as a capital gain.
If crypto is held by a limited company rather than by you personally, the rules are different. The company pays corporation tax on its gains, and the £3,000 allowance does not apply.
A worked example
Say you bought some tokens for £4,000 and later swapped them for a different coin when they were worth £12,000. You have made a gain of £8,000, even though you never received any pounds. Take off the £3,000 allowance and £5,000 is taxable. At 18% the tax is £900, or £1,200 at 24%, so you keep £7,100 or £6,800 of the £8,000 gain. The tax has to be paid in pounds, even though what you hold is the new coin rather than cash. If you had other gains in the same year, the allowance may already have been used.
The £3,000 allowance
You can make gains of up to £3,000 in a tax year without paying capital gains tax. This is one allowance across all your assets, not £3,000 for crypto alone. Above it, gains are taxed at 18% or 24%. You pay 18% on the part of the gain that fits within your basic rate band, the income band taxed at 20%, and 24% on the rest. Losses can be set against gains, but only if you report them to HMRC.
Even if your gains are under £3,000, you still need to report your disposals if the total you received from them in the year is more than £50,000.
Keep proper records
You need a record of every transaction: the date, the type of token, how many units, the value in pounds at the time and any fees. HMRC works out gains using pooled costs, which means the average cost of all the tokens of one type you hold, with special rules when you buy tokens of the same type on the same day as a sale or within 30 days after it, so the calculation needs the full history, not just your latest balance. Platforms close and change their terms, so download your history regularly rather than relying on getting it later. The same habits as good bookkeeping for a business apply here.
Common mistakes
- Ignoring small swaps. Each swap is a disposal, however small, and they add up over a year.
- Only counting withdrawals to your bank. The tax is based on disposals, not on when money reaches your account.
- Losing records when a platform closes. Download your history while you still can.
- Forgetting losses. Losses have to be reported to HMRC before they can be used, usually within four years of the end of the tax year.
- Assuming DeFi is outside the rules. Lending, liquidity pools and staking can create disposals or income, depending on how they work.
What about previous years?
If you have undeclared gains from earlier years, you can tell HMRC using its online disclosure service for cryptoassets. You work out the tax, interest and any penalty, submit the disclosure and then have 30 days to pay. How far back you go depends on the reason: four years if you took reasonable care, six if you were careless and up to 20 if it was deliberate. Penalties are usually lower when you come forward before HMRC contacts you than when it finds the gains first.
Glossary
Capital gains tax: Tax on the profit you make when you dispose of something that has gone up in value.
Disposal: Parting with an asset in any way: selling it, swapping it, spending it or giving it away.
Gain: The difference between what an asset cost you and what it was worth when you disposed of it.
Annual exempt amount: The amount of gains you can make each tax year without paying capital gains tax. It is £3,000 for 2026 to 2027.
Basic rate band: The slice of taxable income charged at the 20% basic rate, from £12,571 to £50,270 for most people in England, Wales and Northern Ireland.
Pooled costs: The average cost of all the tokens of one type you hold, used to work out the gain when you dispose of some of them.
Staking: Locking up tokens to help run a blockchain network in return for rewards.
DeFi (decentralised finance): Lending, borrowing and trading crypto through apps that run on a blockchain rather than through a company.
Cryptoasset Reporting Framework: International rules that require crypto platforms to collect details of their users and transactions and pass them to tax authorities.
Voluntary disclosure: Telling HMRC about tax you owe for past years before it contacts you.
Related reading
- How Long Should Your Accountant Take to Get Back to You?
- The £60k and £100k Tax Traps: When Earning More Leaves You Worse Off
- Good Bookkeeping: The Unsung Hero of Smart Business Decisions
What to do now
- Download your full transaction history from every platform and wallet you use.
- Work out your gains and losses for each tax year, including swaps.
- Report them on your self-assessment return, which has its own section for cryptoassets from the 2024 to 2025 tax year. Our post on what to expect from your accountant sets out the key self-assessment dates.
- Talk to us if you think earlier years need correcting.
HMRC’s own guidance explains when you need to pay tax on cryptoassets. If you want help working out your position, book a free chat.