Crypto has moved a long way from being something only discussed by tech enthusiasts on internet forums. These days, we regularly speak to clients who have bought Bitcoin, Ethereum, NFTs or other cryptoassets, often through an app on their phone and sometimes without really thinking about the tax position.
Some people have made money from crypto. Some people have lost money. Some people have been scammed. And quite a lot of people have assumed that, because crypto feels informal or anonymous, HMRC will never know about it.
That assumption is becoming increasingly risky.
HMRC already expects crypto gains and income to be reported where tax is due. From 2026 onwards, crypto activity will also become much more visible under new international reporting rules known as CARF, the Cryptoasset Reporting Framework.
So, if you have cryptoassets or are thinking about buying them, here are the main tax and practical points to consider.
Should I invest in crypto?
This is not something we can answer for you.
As accountants, we can advise you on the tax consequences of buying, selling or holding cryptoassets, but we cannot give investment advice. Crypto can be extremely volatile. Values can rise quickly, but they can also fall just as quickly.
The usual investment warning applies: the value of your investment can go down as well as up, and you may not get back the money you put in.
We have heard of people using money set aside for tax bills to invest in crypto, hoping to make a quick profit before the tax payment is due. Please do not do this. If the investment loses value, you may still have a tax bill to pay but no money left to pay it.
Only invest money you can genuinely afford to lose.
Be very careful where you invest
Crypto is an area where scams are common.
Some scam platforms look very convincing. They may have professional-looking websites, fake dashboards, online reviews and people calling you to “help” with your investment. Some will even show you fake profits to encourage you to invest more.
Warning signs include:
- being contacted out of the blue by phone, email, WhatsApp or social media
- being promised guaranteed returns
- being pressured to invest quickly
- being told that someone can recover lost crypto for a fee
- being told you must pay “tax” to the platform before you can withdraw your money
- being unable to withdraw funds unless you make another payment
The “pay tax before you can withdraw” line is particularly nasty. HMRC does not collect tax through crypto exchanges in this way. If a platform tells you that you need to pay them the tax before they release your funds, that is a major red flag.
It is also worth being careful with online reviews. Reviews can be helpful, but scam companies can flood review sites with fake positive feedback. If something looks too good to be true, it probably is.
Is crypto tax-free?
No.
There is no special tax-free treatment just because something is a cryptoasset. HMRC’s view is that cryptoassets are taxable under the normal tax rules.
For most individuals, crypto is treated as a personal investment. This means that gains are usually subject to Capital Gains Tax (CGT) when you dispose of the asset.
A disposal does not just mean cashing out into pounds.
You may have a taxable disposal if you:
- sell crypto for GBP or another fiat currency
- exchange one cryptoasset for another
- use crypto to buy goods or services
- give crypto away to another person, unless the transfer is to your spouse or civil partner
This is the bit that often catches people out.
You might think, “I haven’t taken any money out, so there can’t be a tax problem.” But if you swapped one token for another, that can still count as a disposal for tax purposes.
Example: selling crypto at a profit
Let’s say you bought crypto for £10,000 and later sold it for £25,000.
The gain would be:
Sale proceeds: £25,000
Less original cost: £10,000
Gain: £15,000
You would then deduct your available annual CGT exemption, if you have one available.
The annual exempt amount is now much lower than it used to be. For 2025/26 and 2026/27, the CGT annual exempt amount for individuals is £3,000.
So, assuming no other capital gains in the year:
Gain: £15,000
Less annual exempt amount: £3,000
Taxable gain: £12,000
The tax rate depends on your overall income and the type of asset. Crypto gains are generally taxed at the non-residential property CGT rates.
The key point is that the gain is taxable even though it came from crypto.
What if I make a loss?
Crypto losses can still matter.
If you dispose of cryptoassets at a loss, that loss may be available to offset against other capital gains (either now or in the future). However, you normally need to claim the loss within the relevant time limit.
This can be useful if you have made gains elsewhere, for example on shares or another cryptoasset.
The important thing is to keep records. If you do not keep evidence of the original cost, sale value and transaction dates, it becomes much harder to support a loss claim.
When does Income Tax apply instead of CGT?
For most individuals, HMRC expects crypto profits to be subject to Capital Gains Tax.
However, Income Tax can apply in some situations, including where cryptoassets are received from:
- employment
- mining
- staking
- airdrops, depending on the circumstances
- trading activity, in exceptional cases
HMRC generally says that individuals buying and selling crypto personally will only be treated as trading in exceptional circumstances. This would usually require a high level of organisation, frequency, sophistication and commercial activity.
In plain English, buying and selling crypto occasionally is typically an investment activity, not self-employment. But if someone is operating in a very organised and commercial way, the position may need to be reviewed carefully.
What records do you need to keep?
Good records are essential.
Crypto tax calculations can become difficult very quickly, especially if you have many transactions across multiple exchanges or wallets.
You should keep records of:
- the type of cryptoasset
- the date you bought it
- the number of units bought
- the amount paid in pounds sterling
- the date you sold, exchanged or gifted it
- the number of units disposed of
- the value in pounds sterling at the date of disposal
- fees paid
- wallet addresses and exchange records
- bank statements showing deposits and withdrawals
- records of any transfers between wallets
Do not assume that your accountant can work this out from a screenshot of your current balance.
Crypto tax calculations usually need a full transaction history. If you have used multiple platforms, we may need records from each one.
If you have a large number of transactions, specialised crypto tax software may be needed to produce the reports.
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What is CARF and why does it matter?
CARF stands for the Cryptoasset Reporting Framework.
It is a new international reporting framework designed to make crypto activity more visible to tax authorities.
From 1 January 2026, cryptoasset service providers will need to collect certain information about users and transactions. This includes information that can identify the taxpayer and link crypto activity back to them.
The first reports are expected to cover the 2026 calendar year, with reporting to HMRC due in 2027.
This does not mean that every crypto holding automatically creates a tax bill. Holding crypto is not, by itself, usually a taxable event.
However, it does mean that HMRC will have much better information. If you have sold, exchanged, gifted or received crypto and have not reported the tax position correctly, the chances of HMRC spotting a mismatch are likely to increase.
The days of assuming “HMRC will never know” are coming to an end.
Do I need to report crypto if I have not cashed out?
Possibly.
This is one of the biggest misunderstandings with crypto.
You may still have a taxable disposal even if you have not withdrawn money to your bank account.
For example, if you swap Bitcoin for Ethereum, that is normally treated as selling one asset and buying another. If the Bitcoin has increased in value since you bought it, there may be a taxable gain.
Similarly, if you use crypto to buy something, that is normally treated as a disposal.
The question is not just “did money hit my bank account?” The question is “did I dispose of a cryptoasset?”
What if I forgot to declare crypto in an earlier year?
If you have missed crypto gains or income from a previous tax year, it is usually better to deal with it before HMRC contacts you.
HMRC has a Cryptoasset Disclosure Service which can be used to disclose unpaid tax on cryptoassets. The exact approach will depend on the years involved, the amounts, whether tax returns were filed, and whether the omission was deliberate or accidental.
If you think you may have missed something, do not ignore it and hope it disappears. Get advice and put it right.
Can my limited company invest in crypto?
Yes, a limited company can invest in cryptoassets, but it needs to be done properly.
If the company is investing, the exchange account should be in the company’s name. The money should leave the company bank account and be transferred to a company-owned exchange account or wallet.
If company money is transferred into an exchange account in the director’s personal name, that is not the same thing. HMRC may treat the money as having been drawn personally by the director. Depending on the circumstances, this could create dividend issues, director’s loan account problems, benefit issues or additional tax charges.
Companies do not have an individual CGT annual exempt amount. A company’s profits or gains from crypto will usually be dealt with under the Corporation Tax rules.
There are also practical points to think about:
- does the company’s bank allow payments to crypto exchanges?
- can you open a corporate exchange account?
- who controls the wallet?
- how are private keys stored?
- what happens if access is lost?
- how will the transactions be recorded in the company accounts?
- does this fit with the company’s trade and risk profile?
For most small owner-managed companies, investing company funds into crypto should not be done casually. Tax is only one part of the decision.
Can I give crypto to someone else?
Yes, but there may be tax consequences.
Giving crypto to another person is usually treated as a disposal for Capital Gains Tax purposes. The disposal value is normally based on market value, not what the person paid you.
Transfers between spouses or civil partners are generally treated differently. They may be on a no-gain/no-loss basis, but advice should be sought, especially if large amounts are involved, or there is a separation or divorce.
Practical tips before your tax return
If you have cryptoassets, here are some sensible steps:
- Download your transaction history regularly. Do not wait until January.
- Keep records from every exchange and wallet you use.
- Record values in pounds sterling.
- Tell your accountant if you have bought, sold, exchanged, gifted or received crypto.
- Do not assume “no withdrawal” means “no tax”.
- Be careful with platform-generated tax summaries, as they may not apply UK tax rules correctly.
- Set aside money for taxes if you have made gains.
- Get advice before using company money to invest.
- Be cautious of scams, especially anything involving pressure, guaranteed returns or paying fees to release funds.
- If you have missed earlier years, deal with it sooner rather than later.
Frequently Asked Questions
Possibly. Tax can arise when you dispose of crypto, not just when money arrives in your bank account. Selling, swapping, gifting or using crypto to buy something can all be disposals.
Simply holding crypto is not usually taxable. Tax is more likely to arise when you dispose of it, receive it as income, or use it in a way that creates a taxable event.
A crypto loss may be useful if it can be claimed and offset against capital gains. You need proper records to support the loss, including dates, values and transaction details.
Yes, but the investment needs to be made by the company, through a company account or wallet, and recorded correctly. If company money is used in a personal crypto account, that can create director’s loan or tax issues.
Yes, but the investment needs to be made by the company, through a company account or wallet, and recorded correctly. If company money is used in a personal crypto account, that can create director’s loan or tax issues.
Yes, but the investment needs to be made by the company, through a company account or wallet, and recorded correctly. If company money is used in a personal crypto account, that can create director’s loan or tax issues.
Final thoughts
Crypto is not tax-free, and it is no longer sensible to assume it is invisible.
If you are investing personally, keep proper records and understand when a taxable disposal happens. If you are thinking about using company money, get advice first.
The tax rules around crypto can be complicated. Still, the basic message is simple: tell your accountant early, keep good records, and do not wait until HMRC already has the information before dealing with it.
If you have bought, sold, exchanged, or received cryptoassets and are not sure whether anything needs to be reported on your tax return, BBK Accounts can help you review your position and work out what needs to be reported.
