Do you pay tax on cryptoassets? How to report and pay it
Tens of thousands of letters were sent to crypto investors suspected of underpaying tax in 2025/26. How do you report and pay tax on any gains you’ve made?
Almost one in 10 people in the UK own cryptoassets, but HMRC suspects tens of thousands are failing to pay tax on them properly.
According to the Financial Conduct Authority (FCA), 8% of UK adults held cryptoassets in 2025, up from 4% in 2021.
However, there’s concern some crypto investors don’t understand the tax implications of receiving, holding and selling these assets.
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HMRC sent out 81,000 warning letters to crypto investors it suspected of underpaying tax in 2025/26, according to a Freedom of Information (FOI) request by accountancy firm UHY Hacker Young, up from 65,000 in 2024/25 and 27,700 in 2023/24.
Neela Chauhan, a partner at the firm, said: “A lot of the traders are young, have had little previous exposure to HMRC and often work under the assumption that HMRC has limited visibility over their activities.”
Recent FCA research found UK-based crypto investors tend to be younger, with 15% of 18 to 34-year-olds owning cryptoassets versus 9% of 35 to 54-year-olds.
Chauhan added: “The tax treatment of cryptocurrency in the UK is complex, and many individuals do not fully understand their reporting obligations or recognise when transactions give rise to taxable income or gains that must be disclosed to HMRC.
“Crypto investors often forget that you may still have made a taxable gain even when you are swapping one cryptocurrency for another and might not be aware that the income you can earn by lending cryptocurrencies is taxable.”
When you might owe capital gains tax cryptoassets
You may be taxed when you dispose of cryptoassets for gain or profit, as is the case with other assets like stocks or shares.
Disposing of a cryptoasset involves selling it, exchanging it for another type of cryptoasset, using it to pay for goods or services or giving it to another person, unless that person is a spouse, civil partner or you are giving it to charity.
Different types of cryptoasset, such as Bitcoin and Dogecoin, are typically treated as separate assets and gains need to be calculated on each type individually.
Everyone receives a capital gains tax (CGT) allowance of £3,000 each financial year. This means you can make up to £3,000 in capital gains without owing any CGT.
If you make more than this allowance in gains when disposing of assets, including cryptoassets, you will likely owe CGT.
Typically, the gain made is calculated by working out the difference between what you paid for the asset and what it sold for.
However, sometimes you have to use the market value to work out a gain, for example if you have cryptoassets that have been transferred between ‘connected persons’ – such as a spouse or civil partner.
How to report and pay cryptoasset capital gains
You can report gains on cryptoassets by either completing a self-assessment tax return at the end of the tax year or by using the CGT ‘real time’ service.
If you’re reporting your gain on a self-assessment return, you should complete it in pound sterling within the cryptoasset section.
You can use the real time CGT service to report assets sold in the current or previous tax year.
When working out your gain you can deduct certain allowable costs. This includes transaction fees (exchange or trading fees) and costs incurred for advertising a cryptoasset for sale.
You can also offset capital gains made from cryptoassets with capital losses, but you must report these losses to HMRC.
Meanwhile, if you’ve paid income tax on a cryptoasset, you won’t pay CGT on that amount. You may have to pay CGT when you come to dispose of that asset though.
Once you’ve reported any gains, HMRC will send you a letter or email with a payment reference number starting with ‘X’.
You use this reference when paying the tax, either through the online tax payment service or through online banking or cheque.
You have to report any gains by 31 December in the tax year after you made them, and pay by 31 January.
For example, if you made a gain in the 2025/26 tax year, you would need to report it by 31 December 2026 and pay the gain by 31 January 2027.
When you might owe income tax on a cryptoasset
You may also owe income tax on cryptoassets if you received them in a specific way.
Mining
‘Mining’ involves helping to solve difficult mathematical problems and maintaining a cryptoasset network, for which you can earn rewards.
HMRC generally treats income made from mining as trading or miscellaneous income which means it’s subject to income tax.
Staking
‘Staking’ is when you temporarily lock up your cryptoassets to keep a blockchain network running. In return, you can earn extra cryptoassets as a reward.
Like mining, you have to pay income tax on these earned cryptoassets.
Airdrops
A cryptocurrency airdrop is when someone is given free tokens, sometimes as part of a market or advertising strategy to raise awareness of a new digital currency.
You may also receive airdrops for answering a survey or helping promote a digital currency through social media.
Typically, if you received airdropped cryptoassets in return for a service, you will owe income tax.
Employment income
If you receive cryptoassets as income from an employer, they count as ‘money’s worth’ and the value of the asset will be subject to income tax.
Allowance for money earned through trading income and miscellaneous income
You receive a £1,000 allowance per year for trading income or miscellaneous income.
This can apply to income earned through mining, staking and airdropping, so income tax would only apply on income above this threshold.
