The question on many British crypto investors’ minds is whether they need to pay taxes despite it being a relatively new asset class. The answer is ‘Yes’, and if you hold cryptocurrencies like Bitcoin (BTC) or Ether (ETH) as a personal investment, and sell them for a profit, then the law requires you to pay capital gains tax on those proceeds.
This article is a comprehensive guide to the 2025 UK Crypto Tax regime for capital gains or losses, where we discover the ins and outs of crypto taxation. So, let’s get started.
Is Cryptocurrencies Taxable in the UK?
The short answer is ‘Yes’ for most crypto investors. While financial institutions in the country don’t recognize cryptocurrencies as money or currency, under the tax laws, the digital assets are treated similarly to shares and are taxed the same. This means all activities related to cryptocurrency, including decentralized finance (DeFi), mining, trading, and staking, will be taxable.
HM Revenue and Customs (HMRC), the agency responsible for the collection of taxes in the UK, has classified cryptocurrencies as digital assets protected by cryptographic techniques that can be transferred, stored, and traded electronically.
The HMRC has identified four main types of crypto assets:
1. Exchange Tokens: These are cryptocurrencies used for payments and investments
2.Utility Tokens: They provide access to specific goods and services offered by blockchain networks
3.Security Tokens: These tokens represent rights in a crypto business, like ownership or profit claims
4.Stablecoins: Stablecoins are cryptocurrencies pegged to stable assets like fiat currency or gold to maintain value
Crypto Capital Gains Tax In The UK
Capital Gains Tax is applied when you make a profit selling or disposing of a cryptocurrency that has increased in value. Here, only the percentage of gains made is taxed, and not the total amount received from the transaction. Disposals of crypto include:
- Selling cryptocurrencies for GBP or another fiat currency
- Trading one crypto token for another, including stablecoins
- Spending crypto on goods and services
- Gifting crypto to others – unless this person is your spouse or civil partner
However, the UK offers an annual tax-free allowance called the Annual Exempt Amount, which is 6,000 pounds for the 2023/2024 tax year, and for 2024/2025, this amount will be reduced to 3,000 GBP.
Crypto investors can make gains of up to this amount without paying goods and services tax (GST). If your crypto gains exceed this allowance, then you will have to pay capital gains tax (CGT) on the excess, the rate of which depends on your taxable income. Take a look at this table to understand the CGT for crypto assets:
| TAX BRACKET | INCOME RANGE | CGT RATE ON ASSETS |
| Basic | 12,571 GBP – 50,270 GBP | 10% |
| Higher | 50,271 GBP – 125,139 GBP | 20% |
| Additional | Over 125,139 GBP | 20% |
Unlike most countries in the world, the UK doesn’t have a short-term and long-term CGT rate, and all capital gains are taxed at the same rate. In 2025, you will be paying either 10% or 20% tax on any crypto gains, depending on the income tax bracket you fall under.
Crypto Capital Losses In The UK
Not all crypto investments need to yield gains as some can lead to you suffering capital losses, which are not subject to CGT. In the UK, you can offset unlimited capital losses against gains, reducing them to the 6,000 GBP tax-free allowance for 2023-2024, to avoid paying capital gains tax.
Even if your crypto gains are below the necessary threshold and you don’t file any returns, it is recommended to register losses to carry them forward. Although the HMRC allows four years to register losses, it is wise to do it in the year incurred. If you are not filing a self-assessment tax return, then you can notify the agency in writing to register your losses.
UK Cost Basis Method
Crypto investors often trade multiple assets and are involved in potentially hundreds of yearly transactions. This is why a cost basis method is essential, which helps them calculate the gains and losses made on identical assets.
The HMRC has specified ‘share-pooling’ as the crypto cost basis method, which prevents any manipulation in calculating capital gains and losses through rapid buy-sell actions to distort the actual financial picture.
There are three cost-basis methods, which are the following:
1.Same-Day Rule
If you are buying and selling cryptocurrencies on the same day, then you need to use the cost basis on this day to calculate the gains/losses made.
2.Bed and Breakfasting Rule
This is applicable if you are selling and then repurchasing the same cryptocurrency within 30 days. In this case, you will use the cost basis of the coins you bought within the month to calculate gains/losses.
3.Section 104 Rule
If the two rules mentioned above don’t apply to any of your crypto transactions, then you need to use the Section 104 rule to calculate your taxes. In this method, you calculate an average cost basis for a pool of assets by adding up the total amount paid for all assets and dividing it by the total amount of coins held.
How To Report Your Crypto Taxes To HMRC?
Follow these steps to report your crypto capital gains or losses to the HMRC through a Self Assessment tax return:
- Sign up for Self Assessment on the HMRC website if you are not already registered
- Fill up the capital gains summary pages, reporting all gains and losses made through investments, including in cryptocurrencies
- Submit your tax return online by 31st January after the tax year ends. Paper returns need to be submitted to the HMRC by October 31st
- Pay any tax that is due by the same deadline
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