Crypto Mining Tax in the UK: When It's Income, When It's Capital Gains

Why mining is taxed twice, not once

Crypto mining confuses a lot of people because it looks like a single event — you run some hardware, you get some coins — but HMRC splits it into two entirely separate tax charges that can fall in different tax years and use different rules.

Stage one: receiving the reward. The moment you gain control of newly mined coins or tokens, HMRC treats their sterling market value on that date as income. This is either miscellaneous income (most small-scale, casual miners) or trading income (larger, organised operations run with a clear commercial structure).

Stage two: disposing of the coins. Whenever you later sell, swap for another cryptoasset, spend, or gift the mined coins, that's a disposal for Capital Gains Tax purposes. Your gain or loss is calculated using the value you already declared as income in stage one as your starting cost.

Missing either stage is a common and costly mistake — some miners correctly report the eventual sale as a capital gain but forget the income charge on receipt, or vice versa.

Stage one: mining rewards as income

Hobby-scale mining and the trading allowance

If you mine casually — a spare graphics card, modest home setup, no serious commercial infrastructure — your rewards usually count as miscellaneous income. The £1,000 trading allowance can be set against this income each tax year. If your total miscellaneous/mining income is £1,000 or less, it is entirely covered by the allowance: no tax is due, and if you have no other reason to file, you don't need to submit a Self Assessment return.

Above £1,000, you choose between deducting the £1,000 allowance from your gross receipts, or deducting your actual costs (electricity, a proportion of equipment costs) — whichever produces the lower taxable amount.

When mining becomes a trade

If your mining is run more like a business — significant capital invested in rigs, dedicated hosting or premises, continuous operation, active management of hardware and electricity contracts, and a clear profit-seeking structure — HMRC may treat the activity as trading. Profits are then assessed as trading income through Self Assessment, and Class 4 National Insurance applies on profits above the lower profits limit of £12,570, at 6% up to £50,270 and 2% above that, on top of Income Tax.

There's no single test that flips you from "hobbyist" to "trader" — HMRC weighs scale, organisation and commerciality together, in a similar spirit to the badges-of-trade tests used for other side income.

Valuing the reward

Whichever category you fall into, you need the sterling value of each mining reward on the date (ideally the exact time) you received it. This becomes both:

1. The income you declare for that tax year, and
2. Your base cost for that specific batch of coins when you eventually dispose of them.

Mining pool dashboards and major exchanges typically retain historic pricing, but the record-keeping obligation is yours, not theirs.

Stage two: disposing of mined coins

When you later sell, swap, or spend mined coins, you have a CGT disposal. The taxable gain is:

Disposal proceeds − the value already taxed as income at receipt (your base cost)

Coins of the same type are pooled together under HMRC's share-pooling rules (similar to shares), so if you've received many small mining payouts over time, they combine into a single pooled cost for that cryptoasset rather than being tracked reward-by-reward when you sell.

Gains are measured against the £3,000 annual exempt amount for 2026/27. Gains above that are taxed at:

Cryptoassets fall under the "other assets" CGT rates, not the residential property rates.

Worked example

Amelia runs a small home mining setup as a hobby, alongside her full-time job.

• March 2026: she receives mining rewards worth £1,600 in total across the tax year (valued in sterling on the day of each payout).
• She deducts the £1,000 trading allowance, leaving £600 of taxable miscellaneous income, added to her other income and taxed at her marginal rate (20% basic rate = £120 due).
• October 2026: she sells some of those mined coins for £2,400. Her base cost (the value already taxed as income) for the coins sold is £1,000.
• Her capital gain is £2,400 − £1,000 = £1,400, which is below the £3,000 annual exempt amount, so no CGT is due on the disposal.

If the same coins had instead risen in value to £5,000 by the time she sold, her gain would be £4,000, of which £1,000 (£4,000 − £3,000 exempt amount) would be taxable at 18% or 24% depending on her total income for the year.

Record-keeping that actually works

For each mining reward, keep:

• The date and time received
• The quantity of coins/tokens
• The sterling value at that date/time, with your source (exchange rate screenshot, pool statement)
• Running totals for the tax year, to check against the £1,000 trading allowance

For each disposal, keep:

• The date, quantity and sterling proceeds
• Which pooled acquisitions the disposal is matched against
• The resulting gain or loss calculation

Spreadsheet tracking is workable for occasional miners; anyone running a serious operation with frequent payouts should consider dedicated crypto tax software that applies HMRC's pooling rules automatically.

Work out your overall Income Tax position with

and check a capital gain against the current allowance and rates with .

FAQs summary

Crypto mining tax trips people up because it doesn't feel like "getting paid" in the way a salary does — there's no payslip, no PAYE deduction, and often no cash changing hands at all. But HMRC's position is consistent: value the reward the day you get it, declare it as income, then track it forward as your cost basis for whenever you eventually dispose of it. Getting both stages right from the start is far less painful than reconstructing years of mining history after an HMRC enquiry letter arrives.