UK Crypto Tax Guide 2025: Latest HMRC Updates

Some crypto activities are tax-exempt. These activities include:

💳  Buying crypto with GBP.

🔁  Transferring crypto between your own wallets.

🔒  Holding crypto.

🎁  Gifting crypto to your spouse.

♥️  Donating crypto to charity.

Crypto is classed as a capital asset subject to Income Tax or Capital Gains Tax in the UK depending on the specific transaction. 

If your profit is classed as income, you’ll pay Income Tax at your bracket rate. If your profit is classed as a capital gain, you’ll pay Capital Gains Tax.

You’ll have a capital gain or loss when you dispose of your crypto. You’ll pay Capital Gains Tax on any gain. Any capital loss can be offset against your taxable gains to reduce your tax bill.

As part of the Autumn Budget 2024, the current government increased the Capital Gains Tax rate, effective from the 30th of October 2024. This means for the next financial year, you’ll pay 10% or 20% tax (depending on how much you earn) on any gains prior to the 30th of October 2024, or 18% or 24% tax on any gains after the 30th of October 2024.

For the 2025/26 tax year, HMRC will offer each taxpayer a £3,000 Capital Gains Tax free allowance, so you’ll only pay tax on capital gains over this amount. This is a continuation of the lower allowance introduced in 2024/25, down from higher thresholds in previous years.

You can see the latest HMRC Capital Gains Tax rates here.

Disposals of crypto include:

🏡  Selling crypto for GBP or another fiat currency.

🤝🏽  Trading one crypto for another, including NFTs, stablecoins, and other tokens.

🧸  Spending crypto to pay for goods or services.

🎁  Gifting crypto - excluding to your spouse or civil partner.

Other crypto transactions may result in additional income. This includes:

💰  Getting paid in crypto - which may also be subject to National Insurance
⛏️  Mining rewards
🏦  Staking rewards
💸  Referral bonuses
🪂  Airdrops - in some instances

As well as this, there are a number of DeFi activities that may be taxed as either income or capital gains. It all depends on the nature of your income and whether it constitutes income or a capital gain - which means it all comes down to how your specific protocol works. HMRC did previously have guidance on this, but it’s currently undergoing consultation and review with industry experts. 

You can see the latest HMRC Income Tax rates here.

To start, you need to know your cost basis. This is how much your crypto costs, plus any allowable fees like purchase or sale fees. For example, if you purchased 1 SOL at £180 with a purchase fee of £5, your cost basis for that SOL would be £185.

For crypto you otherwise acquired where you have no clear purchase cost, this is the fair market value of your crypto in GBP on the day you received it.

Most investors aren’t transacting with singular crypto assets like in our example above. In reality, they’re using multiple platforms and trading multiple assets of the same kind. For example, if you bought 3 SOL throughout the year, all at different prices, how do you know what cost base to use?

HMRC has clear guidance on this which states investors should use the share pooling method for identifying the cost basis of multiple assets of the same kind. This is a specific take on the average cost basis method, with two rules built in to avoid investors creating wash sales. You need to work through each rule as it applies to your assets to figure out which to follow: 

☀️  Same day rule: If you buy and sell the same asset on the same day, use the cost basis on this day to calculate your gain or loss. If you sell more than you bought on that day, move to the next rule.

🗓️  Bed and breakfasting rule: If you sell and repurchase the same asset within 30 days, use the cost basis of the asset you bought within this month to calculate your gain or loss. If you’re selling more than you bought within this month, move to the next rule.

🧮  Section 104 rule: If none of the above applies to your transactions, calculate an average cost basis for your assets by adding up the total amount paid for all assets and dividing it by the total amount of units held.

Once you’ve identified your cost basis, subtract this figure from your sale price to calculate your subsequent gain or loss from your transaction.

If you otherwise disposed of crypto by trading or spending it, use the fair market value of your crypto in GBP on the day you disposed of it as your sale price. 

If you have a capital gain, you’ll pay Capital Gains Tax on this amount. If you have a capital loss, you can offset this against your taxable gains in order to reduce your tax liability.

If you don’t have any taxable gains to offset losses against, you can carry these losses forward to offset against gains in the future - but you’ll need to register these losses within four years in order to do so.

HMRC is clear that lost crypto is not considered a capital loss as the asset still exists. However, if you can prove there is no chance of recovering your crypto, you may be able to make a negligible value claim. If this claim is successful, you would later be able to claim a capital loss.

Once you’ve calculated your gains, losses, and income - you need to report this to HMRC via your Self Assessment tax return. You can do this online via the Government Gateway service or with paper forms including:

• SA100 and Capital Gains Summary SA108 for crypto gains and losses.
• Box 17 of SA100 Self Assessment Tax Return for crypto income.

Tracking your cost basis according to HMRC guidance and calculating your subsequent gains and losses, as well as the fair market value of any crypto income, is hard work for active investors. As such, most opt to use a crypto tax calculator like Koinly to make things easier. 

With Koinly, you can either connect to Kraken via SSO (OAuth) to automatically import your data or you can export your account history from Kraken as a CSV file and upload this to Koinly instead. 

Once Koinly has your transaction data from Kraken, it’ll identify your cost basis using the share pooling accounting method, calculate your gains, losses, and income, and finally, generate your crypto tax reports including the HMRC Capital Gains Summary. 

You can’t legally avoid tax on your crypto without facing penalties from HMRC - but you can reduce your tax bill by:

🔍  Tracking their unrealised losses to identify opportunities to harvest these losses (Koinly has a tax optimization tool to help you do this!)

🌽  Harvesting these losses before the EOFY in order to offset them against taxable gains and reduce their overall tax bill.

💎  Hodling for the moon.

♥️  Donate crypto to a registered charity and claim a tax deduction.

👫  Gift crypto to your spouse or civil partner to utilize their CGT tax free allowance or a lower tax bracket.

Now that you understand how your digital asset investments are taxed, why not continue your crypto journey by checking out our Learn Center.