What Is Crypto Tax UK and How Much Is It?

Cryptocurrency has become one of the hottest topics in the financial world, but with that comes a common question: How much tax do you pay on cryptocurrency in the UK?

If you're an investor, miner, or someone who participates in crypto transactions, it's crucial to understand the tax rules surrounding this digital asset. In this article, we'll break down crypto tax in the UK for 2025, helping you stay informed and compliant.

What Is Crypto Tax UK?

Crypto tax in the UK refers to the taxation of cryptocurrency as capital assets or income, depending on the transaction. The UK government does not recognize cryptocurrency as a form of money or currency but treats it like other capital assets such as shares.

Whether you are selling, trading, spending, or even staking crypto, it’s essential to understand how these actions impact your tax bill.

In the UK, HMRC (Her Majesty’s Revenue and Customs) is responsible for monitoring cryptocurrency transactions. They classify crypto as either Capital Gains Tax (CGT) or Income Tax based on the nature of the transaction.

It’s crucial to know which tax category your transactions fall under so you can calculate your taxes correctly and avoid penalties.

READ ALSO: Why Bitcoin Hit $100K: Is Trump's US-UK Trade Deal the Trigger? 

How to Calculate Crypto Tax UK

The tax you owe depends on the type of crypto transaction you're engaging in. Here’s how it breaks down:

• Capital Gains Tax (CGT): If you're disposing of your cryptocurrency, whether by selling, trading, spending, or gifting it, you are liable to pay CGT on any profit you make. This includes actions such as:

1. Selling crypto for GBP or another fiat currency.
2. Trading one cryptocurrency for another (including stablecoins).
3. Spending crypto on goods or services.
4. Gifting crypto (except to your spouse or civil partner).

The tax is not applied to the full amount of the transaction but only to the capital gains—that is, the profit you made. For example, if you bought Bitcoin at £10,000 and sold it at £15,000, your capital gain is £5,000, and you’ll be taxed on that profit.

Capital Gains Tax Rates in the UK

For the financial year 2024-2025, the UK has reduced the Capital Gains Tax allowance from £6,000 to £3,000. The rates are as follows:

• 10% or 20% based on your overall income:

1. If your income is less than £50,270, you’ll pay 10% on your crypto gains.
2. If your income exceeds £50,270, you’ll pay 20%.

Important Update: Starting October 30, 2024, the rates for Capital Gains Tax will increase:

• 18% for basic rate taxpayers.
• 24% for higher rate taxpayers.

These changes could significantly impact the tax burden on crypto investors. Therefore, staying updated on these changes is key.

Income Tax on Crypto

If you’re earning income from crypto, such as through staking or participating in DeFi (Decentralized Finance) protocols, the returns may be taxed under Income Tax. For instance:

• Staking crypto on a DeFi platform, where you earn interest, could count as income, meaning you’ll pay Income Tax.
• Mining cryptocurrency is considered self-employment income and will also be taxed as Income Tax.

In the 2024-2025 tax year, Income Tax rates range from 20% to 45%, depending on your total earnings. The first £12,570 of your income is tax-free (personal allowance), but any crypto income beyond this amount will be subject to Income Tax.

Can HMRC Track Crypto Transactions?

Yes, HMRC can track crypto transactions. The tax office has an extensive data-sharing program with UK exchanges, which allows them to monitor crypto transactions dating back to 2014.

The government has made it clear that crypto holders must declare their gains, or risk being penalized with interest and additional fines. So, be cautious—even if you're trading on decentralized platforms, HMRC might still have access to the information.

Pro Tip: HMRC’s increased focus on crypto transactions means that more scrutiny is being placed on cryptocurrency activities. Investors should be proactive and report any crypto income or gains they haven’t previously disclosed.

READ ALSO: Why Calculating Income Tax Matters for Crypto Traders and Investors

How Much Tax Do You Pay on Crypto in the UK?

The amount of tax you pay depends on several factors, including the amount of profit you make, the type of transaction, and which income band you fall into. For example:

• If you make £6,000 in profit from crypto in a year, you’ll pay 10% in tax if your total income is below £50,270.
• If your total income is above £50,270, the tax rate on your crypto gains increases to 20%. Additionally, if you make additional crypto income, such as from staking, you may also face Income Tax at rates between 20% and 45%, depending on your total income.

It's essential to track your crypto transactions accurately to determine your tax obligations. Luckily, there are online tools available that can help you calculate your crypto taxes easily.

Conclusion

Understanding Crypto Tax UK is crucial for anyone involved in cryptocurrency transactions. From Capital Gains Tax to Income Tax, knowing when and how to pay tax can save you from penalties and unwanted surprises. Keep in mind the 2024 changes in tax-free allowances and rates that will impact your crypto tax bill.

For more up-to-date news on crypto and helpful guides, you can check out Bitrue Exchange’s blogs and start trading crypto today! Visit Bitrue Blog for news and insights or head over to Bitrue Trade to start your journey.

FAQs

1. Do I need to pay tax on cryptocurrency in the UK?

Yes, if you make a profit from selling, trading, or spending crypto, it’s subject to tax in the UK.

2. How can I calculate crypto tax in the UK?

You can calculate your crypto tax by tracking your gains and applying the Capital Gains Tax or Income Tax based on the nature of the transaction.

3. Can HMRC track my crypto transactions?

Yes, HMRC has access to crypto transaction data from exchanges and can track your activity to ensure you're meeting your tax obligations.