Crypto Tax UK 2026/27 — HMRC Rules on Bitcoin, Ethereum and NFTs

How HMRC classifies cryptocurrency

HMRC published its first Cryptoassets Manual in 2019 and has updated its guidance consistently since. The core position is clear: cryptocurrency is not currency, not money, and not a financial security. It is a capital asset for most holders.

This means:

• Buying crypto with sterling is not a taxable event.
• Selling crypto for sterling is a disposal triggering CGT.
• Swapping one crypto for another (e.g. Bitcoin for Ethereum) is a disposal — even without converting to pounds.
• Spending crypto on goods or services is a disposal at the market value on the date of the transaction.
• Receiving crypto as payment for goods/services, employment, or staking is a taxable income event.

Capital Gains Tax on crypto disposal

CGT rates for 2026/27

The Annual Exempt Amount (AEA) for 2026/27 is £3,000. Gains below this threshold are not taxable. However, you must still report if total proceeds exceed £50,000, even if your gain is below £3,000.

How to calculate your crypto gain

The basic calculation is:

Gain = Disposal Proceeds - Allowable Cost

Allowable costs include:

• The original purchase price in sterling (at the time of acquisition)
• Transaction fees paid on purchase and disposal (exchange fees, gas fees)
• Any reasonable costs of acquiring or disposing of the asset

Example:

• You buy 0.5 BTC in January 2025 for £18,000 (including fees).
• You sell 0.5 BTC in March 2026 for £27,500 (net of fees).
• Gain = £27,500 - £18,000 = £9,500.
• After £3,000 AEA: £6,500 is taxable.
• If you are a higher rate taxpayer: tax = £6,500 x 24% = £1,560.

The S104 share-pooling rule

HMRC requires you to pool all acquisitions of the same type of token together into a Section 104 (S104) pool, tracking:

1. The total number of tokens in the pool
2. The total allowable cost of all acquisitions

Each new purchase adds to the pool at cost. When you sell, you calculate the average cost per token and deduct that from the proceeds.

S104 example

Average cost per ETH at disposal = £5,500 / 2 = £2,750 Gain on 1 ETH = £3,800 - £2,750 = £1,050

The remaining pool: 1 ETH at cost £2,750.

Same-day and 30-day rules

HMRC imposes two anti-avoidance rules to prevent "bed-and-breakfasting" (selling at a loss then immediately repurchasing to reset cost base):

Same-day rule

If you buy and sell the same crypto on the same day, HMRC matches the sale against that day's purchase first (regardless of the S104 pool). This prevents manufactured losses.

30-day rule (bed-and-breakfast)

If you sell crypto and then buy the same crypto within 30 days, the sale is matched against the subsequent purchase price — not the S104 pool average. Only after matching is exhausted does the S104 pool apply.

These rules apply across tax years — selling on 5 April and rebuying on 1 May (within 30 days) still triggers the rule.

Staking rewards — Income Tax treatment

Staking involves locking up cryptocurrency in a proof-of-stake network to validate transactions and earn rewards. HMRC's position:

• Staking rewards are miscellaneous income when received.
• They are valued at market price in sterling on the date of receipt.
• Income Tax applies at your marginal rate (20%, 40%, or 45%).
• National Insurance does not apply unless staking is carried on as a trade.

When you later sell the staked tokens, CGT applies to any gain from the value at the date they were received (your new cost basis) to the disposal proceeds.

Example:

• You receive 0.1 ETH as staking rewards when ETH is £2,800 per token.
• Income recognised: £280. Taxed at 40% = £112 income tax.
• Your cost basis for CGT purposes is £280.
• You later sell for £3,500/ETH (total £350). CGT gain = £350 - £280 = £70.

Mining — trade or income?

Mining cryptocurrency may be treated as:

• Miscellaneous income (HMRC's default for individuals mining at small scale) — taxed as income on receipt.
• Trading income — if mining is a commercial, systematic, organised activity. Trading income is subject to Income Tax and National Insurance Class 4 (9% on profits between £12,570 and £50,270).

HMRC applies the "badges of trade" test. Mining a few tokens on a gaming PC is unlikely to be treated as trading. Operating racks of ASICs as a business almost certainly is.

NFTs — Non-Fungible Tokens

HMRC treats NFTs as capital assets. Key points:

• Buying an NFT with crypto is a disposal of the crypto (CGT event) and an acquisition of the NFT.
• Selling an NFT triggers CGT on any gain (proceeds minus cost basis).
• Creating and selling NFTs as an artist or creator may be trading income rather than CGT — if done commercially and systematically.
• NFTs are not pooled with other tokens even if they share a name — each NFT is a unique asset with its own cost basis.

DeFi — Decentralised Finance

DeFi encompasses lending protocols, yield farming, liquidity provision, and more. HMRC has not issued definitive guidance on every DeFi scenario, but general principles apply:

• Lending crypto (e.g. depositing into Aave or Compound): receiving interest is miscellaneous income. Returning the original crypto is not necessarily a disposal — depends on whether legal ownership transferred.
• Liquidity provision: depositing tokens into an AMM pool in exchange for LP tokens is likely a disposal triggering CGT.
• Yield farming rewards: treated as income on receipt.
• Wrapped tokens: wrapping ETH into WETH or similar may constitute a disposal — HMRC has not provided a clear exemption.

Given the uncertainty, keep detailed records of every DeFi interaction, including dates, amounts, and values in sterling.

HMRC Operation Crypto

HMRC has been aggressively pursuing undeclared crypto gains since 2020. As part of Operation Crypto, HMRC:

• Issued bulk data requests to UK crypto exchanges (Coinbase, Binance UK, Kraken and others) requiring them to share customer transaction data.
• Sent "nudge letters" to taxpayers where data suggests crypto gains may have been unreported.
• Created a dedicated cryptoassets task force.

The UK also participates in the OECD Crypto-Asset Reporting Framework (CARF), which requires automatic exchange of crypto transaction data between countries from 2027. Offshore exchanges are not a safe harbour.

Penalties for non-disclosure range from 30% (prompted disclosure) to 100% (deliberate concealment) of the unpaid tax, plus interest.

Lost, stolen and inaccessible crypto

Lost keys or passwords

Crypto you cannot access because you have lost your private keys is not automatically allowable for tax purposes. You can make a negligible value claim to HMRC if the crypto has become genuinely worthless (e.g. the network collapsed), but not simply because you cannot access it.

Stolen or hacked crypto

Crypto stolen in a hack or scam is similarly not an automatic tax loss. You may be able to claim a CGT loss if you can demonstrate the crypto was stolen and you have no reasonable prospect of recovery. However, HMRC requires evidence and the position is uncertain.

Exchange insolvencies

If an exchange collapses (as happened with FTX), you may be able to claim a CGT loss once it is clear recovery is nil or minimal. Seek professional advice on the timing and mechanism of any claim.

Record-keeping requirements

HMRC expects you to maintain records for each crypto transaction including:

• Type and amount of cryptoasset
• Date of transaction
• Sterling value at the time of acquisition and disposal
• Transaction fees
• The exchange or wallet involved
• Any bank statements showing sterling in/out

Records must be kept for at least 5 years after the tax return deadline for the relevant year (longer if HMRC opens an investigation).

Software tools such as Koinly, CoinTracker, and CryptoTaxCalculator can automate much of this record-keeping by importing exchange transaction histories.

Self Assessment reporting

You must file a Self Assessment tax return if:

• Your total crypto gains exceed the £3,000 Annual Exempt Amount
• Total crypto disposal proceeds exceed £50,000 (even if the gain is below the AEA)
• You have income from staking, mining, or other crypto income sources

Crypto gains are reported on the Capital Gains Summary (SA108) pages. Crypto income is reported on the Additional Information (SA101) pages as miscellaneous income.

The Self Assessment deadline for 2025/26 returns is 31 January 2027 online (31 October 2026 for paper returns).

Crypto and SIPPs

Some providers advertise self-invested personal pensions (SIPPs) that hold cryptocurrency. HMRC has not approved any such arrangements, and holding crypto directly inside a SIPP is likely to violate HMRC's rules on permitted investments — potentially resulting in a tax charge equal to 55% of the value of the investment. Avoid unless HMRC provides specific approval.

Related calculators

The income tax calculator helps you calculate the income tax due on staking or mining rewards at your marginal rate.

The capital gains tax calculator lets you model CGT on crypto disposals and see how the £3,000 AEA reduces your liability.