Knowledge Portal: Managing Business Finances and more

CHRIS BARNARD August 30, 2023

Do you need advice on tax on cryptocurrency? It’s best to be aware of your tax liabilities sooner rather than later, because the penalties for not doing so can add up quickly.

With cryptocurrency transactions, tax rules can get slightly complicated, and you could incur several different liabilities, like income and corporation tax, stamp duties and – depending on transaction types – VAT. Your classification as a business or individual will define how you pay tax, and how much.

How it works: Are you a business or an individual?

HMRC may treat you as a business rather than an individual if your activity level is comparable to a company’s. How does HMRC determine whether you qualify as a crypto trader? This will depend on factors including:

The number and frequency of transactions
Your organisation
Your risk level
The time you devote to the activity
The length of time you hold instruments - whether they’re bought and sold within minutes or retained for longer

Mining cryptocurrency as a business

If mining is classified as a business based on those criteria, any resulting income will be added to your trading profits and be subject to income tax. Fees or rewards for any staking activity will also get added, although reasonable expenses will be deductible.

Remember, while disposing of mined cryptocurrency, any gain in value from the time of acquisition will be added to trading profits. You’ll also have to pay National Insurance contributions for such a transaction.

Tax on Staking or Lending as a Business

This is a grey area because there’s no reporting guidance from HMRC. The best approach is to declare this in the same way as you would mining. If you received payment in a cryptocurrency, you’d need to calculate the fair market value of the coins based on when you received them.

What is a disposal for capital gains purposes?

If you are classed as an individual and hold cryptocurrency as an investment, you’ll be liable to pay capital gains tax upon disposal. “Disposal” has been defined by HMRC as:

Selling crypto assets for money
Exchanging crypto assets for a different type of crypto asset
Using crypto assets to pay for goods or services
Giving away crypto assets to another person

Naturally, the amount of capital gains will be the difference between the sales proceeds from the disposal and the crypto asset’s acquisition cost – the sale price minus the buying price.

How much tax do you have to pay on cryptocurrency?

This depends on your income tax bracket:

If you’re a higher or additional rate taxpayer, your capital gains tax rate will be 20%
If you’re a basic rate taxpayer, your rate will depend on your taxable income and the size of the gain (after any allowances are deducted)

Be aware of same-day and bed-and-breakfasting rules

The Same-day and 30-day rules that apply to shares also come into play with cryptocurrency. That’s to prevent wash sales, which basically means selling crypto and repurchasing it in an attempt to reduce your tax bill.

Same-day rule: Let’s say you sell a cryptocurrency and buy another of the same kind on the same day. In that case, the cost basis for your sale will be the acquisition cost of the crypto you purchased that day. Remember that will still be the case, even if the acquisition happens before the sale, as long as both transactions happen on the same day,
30-day rule: This is similar, but the timeline changes and any crypto you acquire within 30 days of a sale will be used to calculate its cost basis.

The rules are there to ensure you don’t sell your holdings at the end of the tax year, just to create losses that you can write off before repurchasing your holdings immediately.

Trading one cryptocurrency for another

HMRC makes it clear this constitutes a taxable event. That means you’re basically disposing of one asset that’s subject to capital gains tax and then acquiring another. The market value of the crypto you receive is considered as the sale price for that transaction. If this crypto cannot be valued for some reason, you can still use the market value of the crypto you sold.

Paying for goods or services with cryptocurrency

From an HMRC perspective, using crypto to pay for goods or services is the same as selling crypto, so it’s subject to capital gains tax. Remember, though, the market value of the crypto you use to pay for something will be counted as the sales proceeds.

Moving crypto between your own wallets or accounts

While there’s no tax liability created when you move crypto between your own wallets, it’s important to remember you still need to keep track of such movements. If you don’t, HMRC might assume they’re disposals and tax them.

Tax on ICOs or IEOs

Initial Coin Offerings (ICOs) or Initial Exchange Offerings (IEOs) refer to the practice of purchasing tokens or coins in a yet-to-be-released cryptocurrency or company. In such a case, investors pay for the new token using existing cryptocurrencies like Bitcoin or Ethereum.

So it works like a crypto-to-crypto exchange. You’ll have to pay capital gains tax on the crypto you exchange for the ICO token. The “sale proceeds” here will be the market value of the existing crypto – not the new token – on the date that the exchange took place. In addition to that, this same market value will also serve as the cost basis for the new token you receive from the ICO, which you can use to calculate pooled costs.

How to minimise your tax burden

You can still protect yourself from unnecessary tax liabilities if you pay close attention to the rules around tax on cryptocurrency in the UK. This is a guide on what you can and can’t claim.

1/ Make use of your annual capital gains tax allowance

Don’t forget about your allowance. Capital gains tax has to be paid only if you made more than £12,300 (in 2020-21) in profits. Work out your capital gains, and if the result is below the limit, you don’t need to pay any CGT.

2/ Offset your crypto losses

If you sell cryptocurrency for less than the cost basis, you create a capital loss. That loss can be offset against any overall gains, but you’ll need to report it to HMRC first. Losses can be notified by letter or on your tax return. Capital losses can be claimed any time within four years, starting from the end of the tax year in which they occurred.

If the disposal of the crypto is to a connected person, the actual sales price is not considered the same as the sales proceeds, and the market value of the crypto on the date of the transaction is used instead.

3/ Claiming losses for defunct coins

When crypto-assets are subject to wild fluctuation, it’s not unusual for someone to own currency that’s become worthless or of negligible value. In such a case, the owner can file a negligible value claim. In doing so, the crypto assets are treated the same way as when they’ve been disposed of, then re-acquired for the amount stated in the claim. That allows you to write off a major loss for an asset that is now illiquid.

4/ Leveraging deductible costs

When calculating a gain or loss, there are certain allowable costs you can deduct from the sales proceeds:

The consideration (in GBP) originally paid to acquire the crypto asset
The transaction fees paid before the transaction was added to a Blockchain
Any exchange fees related to trades
Professional costs for drawing up the contract for acquisition and disposal
Costs related to advertising for a purchaser or vendor
Costs of making an apportionment or valuation to calculate gains or losses

The following costs are not allowable for capital gains tax purposes:

Any costs that have already been deducted against profits for income tax
The costs of mining activities, such as electricity and equipment

Final thoughts

It’s well worth noting that in a case where mining is a business activity, the crypto assets will form part of trading stock. If the assets are transferred out of trading stock, the business will be treated as if they bought the crypto at the trading accounts’ value. That value can then be used as an allowable cost upon disposal.

If you are cryptocurrency trading as a business or as an individual and need advice, get in touch with us.

FAQs on Crypto Tax in the UK

Do I have to pay tax on cryptocurrency in the UK?

Yes, HMRC treats cryptocurrency as an asset, not currency. You’ll need to pay tax when you dispose of it by selling, swapping, or gifting, depending on whether your activity is classed as investment or trading.

What type of tax applies to cryptocurrency?

If you’re investing, you’ll usually pay Capital Gains Tax (CGT) on profits when you sell or exchange crypto. If you’re trading, mining, staking, or receiving crypto as payment, your earnings may fall under Income Tax or Corporation Tax.

Do I have to pay tax just for holding crypto?

No, simply holding crypto does not create a tax liability. Tax applies only when you dispose of crypto or receive it as income through mining, staking, or similar activities.

How is crypto from mining or staking taxed?

Crypto received from mining or staking is treated as taxable income at its market value when you receive it. If the same assets are later sold, any change in value is subject to Capital Gains Tax.

What records should I keep for HMRC?

You must maintain detailed records for each transaction, including dates, types, GBP values, wallet addresses, and transaction IDs. HMRC can request this information during a compliance check.

Can Collective Concepts Accounting help me manage crypto tax?

Yes, we can help you classify and report your crypto activity correctly, calculate your gains and losses, and ensure you remain fully compliant with HMRC’s evolving guidance on cryptocurrency.

< Older Post

Newer Post >

Business rates: The most outdated tax in the UK?

By Chris Barnard • January 21, 2026

Few things frustrate British business owners more than business rates. If you ask someone running a shop, café, studio, or office, what they think about business rates, you’ll get the same answer. And it isn’t one we can publish! Almost all owners see business rates as outdated, unfair, and out of touch with how businesses work today. It raises an awkward question. In a country supposedly trying to encourage entrepreneurship, regeneration and innovation, why are we still relying on a tax that seems to actively discourage all three? A tax stuck in the past Business rates have existed in some form for centuries. They started as property taxes in 17th-century England, when most wealth was in land and buildings. Back then, it made sense: if you had valuable property, you were seen as successful and able to help fund local services. Value is now created through digital services, intellectual property, brands and platforms, and not just physical premises. Yet business rates still operate on the same basic principle. Where you are matters more than how you’re actually performing. There have been some attempts at reform but there has been no interest in conceding that the tax is no longer fit for purpose. Rateable values are still based on estimated rents. Revaluations do not happen often, and reliefs are added on top instead of being part of the system. In short, business rates have been adjusted, not redesigned. How much are UK businesses really paying? Many people are surprised by how much businesses pay in rates, especially compared to other business taxes. UK businesses pay more than £25 billion in business rates each year. This is one of the biggest business taxes, second only to employer National Insurance contributions. According to the Office for Budget Responsibility , business rates consistently raise more revenue than corporation tax from SMEs. The way business rates are calculated in England also stands out. For 2024 to 2025, the standard multiplier is just over 51p per pound, so businesses pay about 51p each year for every £1 of rateable value. This is especially controversial because businesses must pay rates even if they are not making a profit. A company can be losing money and still have a large rates bill. In contrast, corporation tax only applies to profits. The British Retail Consortium often points out that business rates hit physical retailers the hardest. Retailers make up about 5 per cent of the UK economy but pay over 20 per cent of all business rates. For many high street businesses, rates are their biggest fixed cost after wages and often cost more than rent. The physical presence penalty Business rates mainly penalise businesses for being visible and having a physical presence. The more established you are in your community, the more you usually pay. Top high street spots, warehouses near transport links, and city-centre offices all have higher rateable values. At the same time, digital businesses can earn a lot in the UK while working from cheaper locations or even abroad. There are some digital services taxes now, but they bring in much less than business rates and only affect a small number of companies. This means the system encourages businesses to keep their physical presence small and discourages investment in high streets, town centres and community spaces. It’s no wonder that our high streets have become like ghost towns. What do other countries do differently? The UK depends more on property-based business taxes than most other countries. In Germany, local authorities levy a trade tax based largely on profits , not property values. France has made big changes to its business taxes by reducing those based on property and focusing more on economic activity and value creation. Many countries check property values more often that the UK, which helps avoid sudden jumps in costs, and they limit yearly increases more strictly. The priority elsewhere is to focus more on what businesses earn, not just where they are. Is reform even possible? Business rates give local authorities a steady and reliable source of income, which makes them hesitant to change the system. However, just because the system is stable does not mean it is fair for those who pay. The current setup puts too much pressure on some sectors that are already struggling, while letting others grow quickly with lower costs. The main obstacle to reform is political. Any real change would shift who pays more or less tax. Some businesses would pay more, others less. It means big decisions which most politicians shy away from. Ignoring this issue has real effects, which we can see on our high streets. Time for a grown-up debate Business rates no longer match how business works in the UK. They discourage investment in physical locations, make competition unfair, and put too much pressure on traditional businesses. Whether the solution is a tax based on turnover or a mix of models, keeping things as they are is getting harder to justify. This is not a question of lowering taxes. The challenge is to find a system that fits a modern economy. Don’t pay too much Business rates might feel immovable, but there are reliefs, exemptions and reductions available. Many businesses either miss them entirely or do not realise they qualify. Small Business Rate Relief, retail and hospitality relief, transitional relief and discretionary local authority support can all make a real difference if they are properly understood and applied. The problem is that the system is complex, inconsistent and rarely explained in plain English. We can look at how much you are paying in business rates and ensure that you are not missing out on possible reductions.