The short answer: do you owe tax on your crypto at all?
Probably, if you have done more than buy and hold. HMRC does not have a special crypto tax. It takes the tokens you already own and slots them into two taxes you have met before: capital gains tax when you dispose of something at a profit, and income tax when you are paid in something of value. Most individual investors land in the capital gains camp, because their activity is buying, selling and swapping rather than earning.
The part that catches people is how broad "dispose" is. You do not need to cash out to pounds to trigger a gain. Swapping Bitcoin for Ethereum, spending crypto on a purchase, or giving tokens to anyone other than your spouse or civil partner all count as disposals, and each one has to be measured in sterling on the day it happened. If your total gains for the year sit under the 3,000 pound allowance you may owe nothing, but you can still be expected to report. Our view, after rebuilding a lot of these positions, is to calculate first and decide second, because the allowance only helps once you know the number. You can read HMRC's own starting point in its capital gains guidance for cryptoassets, and LOYALS, a King's Cross firm of accountants and business consultants, handles the crypto tax computation and filing for investors who would rather have it done once and done right.
Income tax or capital gains tax: which one applies to you?
This is the question that decides everything else, and it turns on how the tokens reached you. If you bought them with your own money and later disposed of them, any profit is a capital gain. If they were handed to you in return for something, work, computing power, locking up a stake, then their value on the day you received them is income, taxed at your normal 20, 40 or 45 percent rate for 2026 to 2027. Many active users have both: income when rewards land, then a separate capital gain when they later sell those same rewarded tokens.
The flowchart below is the quick test we walk clients through on a first call. The one firm position worth stating plainly: if tokens were ever paid to you for doing something, assume income tax applies and keep the sterling value on the day, because that figure also becomes your cost for the later capital gains sum. That advice changes only if the activity is genuinely a trade, which is rare for individuals and brings its own rules. The full picture of how the taxes interact sits in our cryptocurrency tax service and in self assessment and personal tax.
Which crypto events actually trigger a tax charge?
Five everyday actions are disposals for capital gains tax, and the reason crypto tax bills surprise people is that four of them never touch a bank account:
- Selling tokens for pounds. The obvious one. Your gain is the sale proceeds less the pooled cost of what you sold.
- Swapping one token for another. Trading Bitcoin for Ethereum is a disposal of the Bitcoin at its sterling value that day, even though you never saw cash. This single rule generates the most unreported gains we see.
- Spending crypto on goods or services. Paying for something with tokens is a disposal at the sterling value of what you bought.
- Gifting tokens to anyone other than a spouse or civil partner. A gift is treated as a disposal at market value, so you can owe tax on a gain without receiving a penny.
- Earning tokens from work, mining or staking. This one is income first, taxed at your income tax rate when received, and then sits in your pool at that value for a future capital gains calculation.
Notice what is missing: simply buying crypto, holding it while the price moves, and moving it between your own wallets are not taxable events. The tax only ever bites when value leaves your hands or lands in them.
How much is capital gains tax on crypto in 2026 to 2027?
Once you know your total gain for the year, the maths is short. First, the capital gains annual exempt amount takes the first 3,000 pounds tax free for 2026 to 2027. That allowance covers all your gains together, crypto, shares and anything else, not 3,000 pounds for each, and it does not roll into next year if unused. What is left is taxed at a flat rate that depends on your income.
Since 30 October 2024, gains on assets other than residential property, which is where crypto sits, are taxed at 18 percent for basic rate taxpayers and 24 percent for higher and additional rate taxpayers, and those rates still apply for 2026 to 2027. The figures and effective dates are set out in HMRC's capital gains tax rates and allowances guidance. One subtlety that trips people up: your gain stacks on top of your income to decide which rate applies, so a gain can be split across both rates if it straddles the 50,270 pound higher rate threshold.
Put a real number on it. Say you made 12,000 pounds of gains across the year. The allowance clears the first 3,000 pounds, leaving 9,000 pounds taxable. A basic rate taxpayer pays 18 percent, which is 1,620 pounds. A higher rate taxpayer pays 24 percent, which is 2,160 pounds. The same gain, two different bills, decided purely by your other income for the year.
Losses matter here too, and they are often left on the table. A loss on one disposal reduces the gains on others in the same year, and if you report a loss to HMRC you can carry it forward indefinitely to set against future gains. For anyone who traded heavily in a falling market, logging those losses properly can wipe out tax on a later good year.
How HMRC works out your gain: share pooling
You cannot just subtract what you paid for a specific coin, because tokens of the same type are interchangeable. HMRC uses share pooling, the same method used for shares. Each token type has its own pool, called a section 104 pool, holding the total quantity and the total cost. When you dispose of some, you take out a proportionate slice of that average cost. Bitcoin, Ethereum and every other token each get their own pool, and NFTs are treated separately because they are unique.
Two rules override the pool and exist to stop people manufacturing losses. The same-day rule matches any buying and selling of the same token on the same day against each other first. The 30-day rule, sometimes called bed and breakfasting, matches a disposal against any tokens of the same type you buy back within the next 30 days, before touching the pool. The mechanics are set out in HMRC's cryptoassets manual on pooling. In practice this is where doing it by hand falls apart, because a single active year can mean hundreds of matched disposals that have to be worked in the right order.
When your crypto counts as income
If tokens were paid to you rather than bought, income tax comes first. Crypto received as wages counts as money's worth and is subject to income tax and National Insurance through your employer. Tokens from mining, staking, lending or other decentralised finance activity are taxed as income too, usually as miscellaneous income if you are not running a trade, at their sterling value on the day you received them. HMRC sets this out in its guidance on tax when you receive cryptoassets.
There is a small cushion. The 1,000 pound trading and miscellaneous income allowance can cover minor amounts of crypto income, so a few pounds of staking rewards need not mean a tax return on their own. If your total miscellaneous income from all sources is between 1,000 and 2,500 pounds you tell HMRC without a full return, and above 2,500 pounds you must register for self assessment. The honest line we give clients is that once staking or mining income is a regular feature, it is simpler and safer to register and report than to track whether you have crept over a threshold.
What HMRC now sees: the 2026 reporting changes
The biggest change is not a rate, it is visibility. Under the Cryptoasset Reporting Framework, UK platforms and exchanges must collect details of their users and transactions across the whole of 2026 and send the first report to HMRC between 1 January and 31 May 2027. Providers also have to register with HMRC and tell their users that their details will be reported, by 31 January 2027. You will be asked to confirm your name, address and tax number so the data lines up with your tax record.
This matters because it closes the old gap between what people assumed was private and what HMRC can match. A provider that files inaccurate or unverified data faces a penalty of up to 300 pounds per user, which tells you how seriously the platforms will chase correct information from you. The detail is in HMRC's guidance on reporting cryptoasset data and the reporting period and deadlines. Our plain advice: assume HMRC will see your 2026 activity, and file as if it already has.
Penalties and the deadlines that matter
The self assessment calendar is the one to hold onto. For gains or income in the 2026 to 2027 tax year, you must register for self assessment by 5 October 2027 if you are not already in it, file online by 31 January 2028, and pay the tax by the same date. Miss the filing date and the initial penalty is 100 pounds even if no tax is due, with daily penalties building after three months.
For past years that were never declared, HMRC runs a disclosure route specifically for unpaid crypto tax. The number that moves most is the penalty, and it swings hard on whether you come forward. A voluntary, unprompted disclosure attracts far lower penalties than one made after HMRC sends a nudge letter, and interest runs on the unpaid tax from the original due date regardless. The firm position here is straightforward: if there are undeclared years, disclosing before a letter arrives is almost always the cheaper path, and the arithmetic only gets worse the longer it waits.
The records HMRC expects you to keep
HMRC can ask you to prove every figure, so the record is the job. For each transaction keep the date, the type of token, the quantity, the sterling value at the time, the running pooled cost, and a bank statement or exchange record that backs it up. Exchange exports help but rarely stitch together across platforms, and they almost never apply the pooling rules for you.
Keep everything for at least the period HMRC can review, which for most individuals means your records should go back several years. The practical reason to be tidy is simple: when the pool is reconstructed properly from clean data, the final tax number is usually lower and far easier to defend than a rushed estimate.
What this means for you
If you have only ever bought and held, you have nothing to report yet, but keep your acquisition records so the future sum is easy. If you have sold, swapped, spent or earned, work out your position for each tax year, apply the 3,000 pound allowance and the 18 or 24 percent rates, and file. If there are years you missed, come forward before HMRC comes to you, because the reporting net tightens from 2026 and voluntary disclosure is the cheaper door.
None of this needs to be stressful, and it is very fixable even when the history is messy across a dozen wallets. LOYALS is a King's Cross firm of accountants and business consultants that rebuilds crypto tax positions, applies the pooling rules correctly, files the returns and handles any disclosure with HMRC for investors across London and the UK, and we would rather give you a clear number and a closed file than leave you guessing. If you want your full crypto tax position in writing, a 15-minute call is the quickest way to find out exactly where you stand.