Paying Tax on Crypto: What HMRC Expects in 2025/26

Despite market volatility, cryptoassets remain part of many investors’ portfolios — whether that’s long-term Bitcoin holdings, DeFi staking, NFTs, or regular trading on platforms like Binance, Coinbase, or Kraken.

But what many still underestimate is HMRC’s reach and expectations. By 2025/26, the UK tax authority has fully embedded crypto into its compliance strategy. They’re collecting user data from exchanges, issuing nudge letters, and checking self-assessment returns for undeclared gains.

If you hold or trade crypto — even casually — you may already owe Capital Gains Tax, and potentially Income Tax, depending on how you’re transacting.

This post explains exactly how crypto is taxed in 2025/26, what HMRC expects from UK residents, and how to get your records — and returns — in order.

1. Crypto is not “tax-free”

The myth that crypto is untraceable or tax-exempt in the UK is long dead.

HMRC treats most crypto activity — including buying, selling, swapping, or gifting tokens — as taxable. There are two main taxes that can apply:

A. Capital Gains Tax (CGT)

– Applies to most disposals: selling coins, swapping tokens, gifting to others
– Taxed on the gain you make (not the whole sale value)

B. Income Tax and National Insurance

– Applies if you’re earning crypto (e.g. mining, staking rewards, being paid in crypto)
– Also applies if your activity qualifies as a business or professional trade

Which tax applies depends on how you’re interacting with crypto — and HMRC looks closely at both the volume and the nature of your transactions.

2. What is a “disposal” — and why it matters

Under UK tax law, any disposal of crypto can trigger Capital Gains Tax.

This includes:

• Selling crypto for fiat (e.g. GBP or USD)
• Swapping one crypto for another (e.g. ETH to ADA)
• Using crypto to buy goods or services
• Gifting crypto to someone else (except to your spouse)

Even if you never cashed out to GBP, you may still have realised a gain. For example:

You bought 1 ETH for £800 and swapped it for another token when ETH was worth £2,000.
That £1,200 gain is taxable, even though you never converted to GBP.

You must calculate the gain or loss for each individual transaction — and keep detailed records of date, amount, and value in GBP at the time of the transaction.

3. The annual exempt amount is smaller in 2025/26

In 2025/26, the Capital Gains Tax annual exemption is just:

• £3,000 per person
• Down from £6,000 in 2023/24, and £12,300 before that

This means anyone with more than £3,000 in gains across all assets — including crypto, shares, property, or other investments — will need to declare and potentially pay tax.

Rates for CGT on crypto are:

• 10% for basic rate taxpayers (on gains within the unused basic rate band)
• 20% for higher and additional rate taxpayers

This is separate from the special property CGT rates — crypto is taxed like shares or funds.

4. When is Income Tax applied?

Income Tax applies if you’re earning crypto or carrying out activities HMRC classifies as income-generating. This includes:

• Mining
• Staking rewards (depending on structure)
• Airdrops (if not unsolicited or with conditions)
• Getting paid in crypto for services
• Regular trading with business characteristics

This income must be declared at its GBP value at the time received, and is subject to:

• Income Tax (20%, 40%, or 45%)
• Possibly National Insurance if it’s trading income

If you then hold the crypto after receiving it, any future gains on disposal are still subject to CGT — meaning both Income Tax and CGT can apply on the same tokens over time.

5. Investor or trader? HMRC’s line is strict

Most people buying and selling crypto fall under capital gains rules. However, if your activity looks like a business, you may be classed as a trader, which means all profits are taxed as income, not gains.

HMRC considers:

• Frequency and volume of transactions
• Level of organisation and intention
• Use of automation or bots
• Whether you’re acting commercially or speculatively

Being taxed as a trader can mean:

• No CGT allowance
• Full Income Tax and NI on profits
• Stricter record-keeping

If you’re unsure which applies, Merranti can help assess your activity profile and confirm the correct treatment.

6. Record-keeping is non-negotiable

HMRC expects full records of every transaction, including:

• Dates of acquisition and disposal
• Number and type of tokens
• Value in GBP at time of transaction
• Wallet addresses or exchange accounts
• Associated fees and costs

You must calculate gains on a transaction-by-transaction basis, using the Section 104 pooling rules — similar to how share holdings are calculated for CGT.

Most clients use crypto tax software (e.g. Koinly, CoinTracker, Recap) to extract CSVs and generate tax reports — we can help integrate these into your accounts.

7. Gifts and transfers: what still counts as a disposal?

Gifting crypto to anyone other than your spouse or civil partner is a taxable disposal. That includes giving tokens to:

• Friends
• Children
• Other family members
• Charities (though special reliefs may apply)

The gain is based on the market value at the time of the gift, not what they later sell it for.

Spouse-to-spouse transfers remain exempt, and can be used to double CGT allowances or keep gains in the basic rate band.

8. HMRC is collecting exchange data

In recent years, HMRC has:

• Issued data requests to exchanges like Coinbase, eToro, Binance
• Sent “nudge” letters to taxpayers suspected of holding crypto
• Added crypto disclosures to the self-assessment form

By 2025, this is now routine. Most UK-facing platforms share data with HMRC automatically, and exchanges are required under international rules to report accounts, transactions, and balances linked to UK users.

Failing to declare crypto gains is now high-risk — especially if you’ve KYC’d with a UK address, bank details, or phone number.

9. Declaring crypto in your 2025/26 return

If your total disposals exceed £50,000, or your gains exceed £3,000, you must report them on your 2025/26 Self Assessment return.

Even if your gains are within the allowance, you may still need to report if:

• You received staking rewards or income in crypto
• HMRC has asked you to file
• You’ve previously declared crypto activity

If you’re unsure whether to file, we can review your portfolio and confirm — or correct previous years where needed.

Final Thoughts

Crypto is no longer a niche corner of finance — and HMRC no longer treats it as one. In 2025/26, the tax rules are well-established, the exemptions are shrinking, and compliance activity is rising.

Whether you’ve made occasional trades or built a significant portfolio, crypto needs to be handled with the same care as any other investment — with proper records, clear tax treatment, and proactive planning.

At Merranti, we support clients with:

• Reviewing historical crypto activity
• Calculating gains using automated tools
• Structuring crypto between spouses to reduce CGT
• Declaring income and capital gains in your Self Assessment return

Holding crypto? Unsure if you owe tax?
Book a Crypto Tax Review with Merranti — and make sure HMRC doesn’t get more out of your wallet than you do.