Glossary · UK
What is NFT Royalties Tax?
Ongoing royalty payments earned by NFT creators each time their NFT is resold are generally taxable UK income, on top of Capital Gains Tax due on the original sale of the NFT itself.
Full Definition
NFT (non-fungible token) creators often build in an automatic royalty — commonly 5-10% of the sale price — that pays out to them every time the NFT is resold on a marketplace, in addition to any profit made on the original mint or first sale. HMRC treats these two income streams differently: the original creation and sale of an NFT by someone doing so as a business or trade is generally Income Tax (self-employment) on the profit, while the ongoing resale royalties are usually also treated as trading or miscellaneous income, taxable in the year they are received, because they are a continuing right to payment rather than a one-off capital disposal. A collector who simply buys and later resells an NFT (rather than creating and royalty-earning from it) is instead usually within the Capital Gains Tax regime on any gain. Because royalty income is often paid in cryptocurrency and can arrive in small, frequent amounts from marketplaces worldwide, keeping a running sterling-value record at the date of each receipt is essential for accurate reporting.