Glossary · UK
What is Crypto Airdrop (Tax Treatment)?
Free tokens received into a crypto wallet, which can be taxable as miscellaneous income or treated as a capital gains matter depending on why they were received.
Full Definition
A crypto airdrop is a distribution of free tokens directly into holders' wallets, often used by new blockchain projects for marketing, as a reward for holding another token, or to reward past activity on a network. HMRC's guidance treats the tax position differently depending on whether anything was done in return for the airdrop: tokens received without doing anything to earn them (for example, simply for holding an existing asset) are generally not taxed as income at the point of receipt, but tokens received in exchange for a service, such as promoting a project or providing some other action, are treated as miscellaneous income and taxable at the recipient's marginal Income Tax rate based on the pound-sterling value of the tokens when received. In either case, once the tokens are later sold, swapped for another cryptoasset, or used to buy something, a separate Capital Gains Tax event is triggered, based on any increase in value between receipt and disposal, using the value at receipt as the acquisition cost. Because airdrop rules turn on specific facts (why the tokens were sent and whether any action was required), and HMRC continues to refine its cryptoasset guidance, records of the date, value in GBP, and circumstances of each airdrop should be kept, and check current HMRC cryptoasset guidance or a specialist adviser before relying on any general rule of thumb.