Is my crypto taxed as income or capital gains by HMRC?

Full answer

HMRC distinguishes between crypto you acquire as an investment and crypto you receive as a form of income, and the two are taxed very differently. Most individuals hold crypto as an investment. When you later dispose of it - selling for pounds, swapping tokens, or spending it - you fall under Capital Gains Tax. For 2026/27 the Annual Exempt Amount is GBP 3,000, and gains above that are taxed at 18% within your basic-rate band or 24% above. Genuine, frequent trading at the scale of a business is rare for individuals; HMRC's default position is that buying and selling is an investment activity, not a trade. Crypto received as a reward is generally taxable as income at the point of receipt, valued in pounds at that time. This covers tokens from mining, staking rewards, airdrops received in return for doing something (such as a service or promotion), and crypto paid to you for work or by your employer. Such amounts are added to your other income and taxed at your marginal rate - for 2026/27 that is 20%, 40% or 45% in England, Wales and Northern Ireland, with Scotland using its own bands up to 48%. Employment-related crypto can also attract National Insurance: employee Class 1 is 8% on earnings between GBP 12,570 and GBP 50,270, then 2% above. Importantly, the pound value taxed as income becomes your acquisition cost for that crypto. If it later rises before you sell, the further growth is a capital gain; if it falls, you may have an allowable loss. Worked example: you receive a staking reward worth GBP 1,000. That GBP 1,000 is income now. If you later sell for GBP 1,400, the extra GBP 400 is a capital gain. Use an income tax calculator for the income side and a capital gains tax calculator for the disposal.

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