UK Tax on Crypto Staking Rewards 2026/27: Income or Capital Gains?

Crypto staking has become one of the most common ways for UK investors to earn a return on their digital assets, but the tax treatment is not always intuitive. HMRC's Cryptoassets Manual makes clear how staking rewards are taxed -- and getting it wrong can lead to an unexpected bill plus penalties.

HMRC's Position on Staking Rewards

HMRC distinguishes between two broad types of crypto activity:

1. Staking that is so highly organised it amounts to a trade -- rare for individual retail stakers, taxed under trading rules
2. Staking rewards received as income -- the default position for most people participating in Proof-of-Stake networks

For the vast majority of UK crypto holders, staking rewards are treated as miscellaneous income under Section 687 of ITTOIA 2005. This means:

• You pay income tax on the market value of the coins at the time you receive them
• The value is calculated in sterling using a fair market price (typically an exchange rate at the time of receipt)
• The coins' cost basis for future CGT purposes is set at that same sterling value

So if you receive 0.5 ETH as staking rewards when ETH is worth £2,000, you have £1,000 of miscellaneous income. If you later sell that 0.5 ETH for £2,800, your capital gain is only £800 (£2,800 minus £1,000 cost basis).

UK 2026/27 Rates at a Glance

These figures apply to the tax year running from 6 April 2026 to 5 April 2027 and are drawn from HMRC's published rates and the Autumn Budget 2024 announcements, which raised CGT rates on most assets with effect from 30 October 2024.

Income Tax Rates on Staking Rewards

Staking income is added to your other income and taxed at your marginal rate:

• Basic rate: 20%
• Higher rate: 40%
• Additional rate: 45%

The Personal Allowance (£12,570 in 2026/27) and the Personal Savings Allowance do not apply to miscellaneous income in the same way -- but your overall income tax calculation takes your total income into account, so smaller staking rewards may fall within the basic rate band.

CGT When You Dispose of Staked Coins

When you sell, swap, or spend tokens originally received as staking rewards, you trigger a capital gain or loss. Key rules:

• Annual Exempt Amount (AEA): £3,000 in 2026/27 -- if your total crypto gains across all disposals are below this, no CGT is due and (technically) no reporting is needed, though HMRC recommends keeping records
• CGT rates: 18% (basic rate taxpayers) or 24% (higher/additional rate) on cryptoassets -- these are the rates following the Autumn Budget 2024 increase
• Same-day and 30-day rules: If you buy and sell the same cryptocurrency on the same day, or buy within 30 days of selling, the "bed and breakfasting" rules apply and specific ordering rules determine your cost basis
• Section 104 pool: All other acquisitions are pooled, and each disposal uses an average cost from the pool

Worked Example

The following examples use 2026/27 figures and assume the taxpayer has no other capital gains in the year.

Example 1 -- Basic-rate staker

Sarah is a nurse earning £32,000 per year. In 2026/27 she stakes SOL (Solana) and receives rewards with a total sterling value of £2,400 across the year (calculated at the spot price each time coins arrived in her wallet).

Income tax on staking rewards:

• Sarah's total income: £32,000 + £2,400 = £34,400
• All income is within the basic rate band (up to £50,270)
• Tax on staking income: £2,400 x 20% = £480

Six months later, Sarah sells the staked SOL for £3,600.

CGT on disposal:

• Proceeds: £3,600
• Cost basis (set at income value): £2,400
• Gain: £1,200
• Annual Exempt Amount: £3,000 -- gain fully covered, no CGT due

Total tax for the year on this activity: £480.

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Example 2 -- Higher-rate staker with a significant gain

James is a senior engineer earning £75,000. He staked ETH throughout 2026/27 and received rewards worth £6,000 in total (market value at time of receipt).

Income tax on staking rewards:

• James already pays higher rate tax on the portion of his salary above £50,270
• All staking income falls in the higher rate band
• Tax on staking income: £6,000 x 40% = £2,400

He later sells all the ETH staking rewards for £9,500.

CGT on disposal:

• Proceeds: £9,500
• Cost basis: £6,000
• Gain: £3,500
• Less AEA: £3,000
• Taxable gain: £500
• James is a higher rate taxpayer: £500 x 24% = £120

Total tax for the year on this activity: £2,400 + £120 = £2,520.

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Example 3 -- Using the £1,000 trading allowance

Priya is a part-time worker earning £10,000. She staked a small amount of ADA (Cardano) and received staking rewards worth £750 in the tax year. She did not dispose of any crypto.

• Total staking income: £750
• This is below the £1,000 trading/miscellaneous income allowance
• Priya can claim the allowance and pay no income tax on the rewards
• No Self Assessment filing required (assuming no other reporting triggers)

Use our Income Tax Calculator to model how staking rewards at different amounts affect your overall income tax position, and our Capital Gains Tax Calculator to estimate CGT on disposals.

DeFi: Lending, Liquidity Pools, and Yield Farming

Decentralised Finance creates more complex scenarios. HMRC's guidance distinguishes:

• Lending protocols (e.g. Aave): If you retain beneficial ownership of the tokens while lending them, interest earned is income. If you transfer the tokens (losing beneficial ownership), HMRC may treat the transfer as a disposal triggering CGT.
• Liquidity pools: Adding liquidity and receiving LP tokens may be a disposal of the original tokens. Removing liquidity is another disposal. Fees earned are likely income.
• Yield farming rewards: Treated as miscellaneous income at market value on receipt, just like staking.

DeFi tax is an evolving area. HMRC published updated DeFi guidance in 2024, and further clarification is expected. Keep detailed records of every transaction.

NFTs

NFTs are cryptoassets for HMRC purposes. Creating and selling NFTs as a business activity is taxed as trading income. Buying and selling NFTs as an investment is subject to CGT. The £3,000 AEA applies to NFT gains along with all other capital gains -- it is a combined allowance, not separate.

Record-Keeping Requirements

HMRC expects you to keep:

• Date of each transaction
• Description of the cryptoasset
• Number of units involved
• Value in sterling at the time of each transaction
• Exchange rate used
• Cumulative pool value after each transaction
• Transaction fees (deductible for CGT purposes in some cases)

Good software (Koinly, CoinTracker, Recap) can automate much of this but you remain responsible for accuracy.

Self Assessment Reporting

You must report crypto income and gains via Self Assessment if:

• Your crypto gains exceed £3,000 in the tax year, OR
• Your total proceeds (not just profit) from crypto disposals exceed £50,000, OR
• You have staking or other crypto income to declare

The deadline for online Self Assessment is 31 January following the end of the tax year. For 2026/27 (ending 5 April 2027), that means 31 January 2028.

Failure to report can result in penalties -- starting at £100 for missing the filing deadline and escalating through daily charges and percentage-based penalties as outlined in HMRC's penalty regime.

Common Mistakes to Avoid

1. Treating staking rewards as tax-free until disposal

Many stakers assume no tax arises until they sell their coins. This is incorrect. Income tax applies at the point of receipt, regardless of whether you ever sell. Failing to account for this leads to an unexpected tax bill for prior years when disposal finally triggers a review.

2. Using the wrong sterling value

HMRC requires you to use the fair market value at the time of receipt, not the price at the end of the tax year or an average annual price. Using a year-end price when coins were received at a different value understates or overstates income and is likely to be challenged on enquiry.

3. Failing to set the correct cost basis

If you paid income tax on staking rewards at £1,000 but later recorded them in your CGT calculation with a £0 cost basis, you will be taxed twice on the same appreciation. Always carry the income-tax value forward as the acquisition cost for CGT.

4. Ignoring the £50,000 proceeds reporting threshold

Even if your net gain is nil or a loss, you must still file a Self Assessment return if your total proceeds from crypto disposals exceed £50,000 in the year. High-volume traders with thin margins can easily breach this threshold without generating a taxable gain.

5. Overlooking DeFi interactions as potential disposals

Depositing tokens into a liquidity pool, receiving LP tokens, bridging assets between chains, and wrapping tokens may all constitute disposals for CGT purposes. Each interaction needs to be assessed individually.

6. Claiming trading status without proper evidence

A handful of stakers attempt to claim their activity amounts to a trade in order to offset losses against general income. HMRC's tests for trading status are strict and require evidence of regularity, organisation, and profit motive consistent with commercial trading. Unsupported claims are likely to be rejected.

7. Missing the 5 October registration deadline

If you were not previously registered for Self Assessment, you must register by 5 October following the end of the tax year in which the liability arose. For 2026/27 income, that is 5 October 2027. Missing this date is itself a potential penalty point.

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Use our Capital Gains Tax Calculator to estimate your CGT liability on crypto disposals, and our Income Tax Calculator to model how staking rewards affect your overall tax bill.