Crypto and Capital Gains Tax — How HMRC Taxes Bitcoin and Digital Assets in the UK

HMRC has been clear since 2019: cryptocurrency is property, not currency. Every disposal — selling, swapping, or spending crypto — is a potential Capital Gains Tax event. And yes, HMRC is watching. They’ve issued “nudge letters” to crypto holders and receive data directly from major exchanges.

What triggers a CGT disposal

Under HMRC’s cryptoasset guidance, a disposal happens when you:

Sell crypto for fiat currency (GBP, USD, EUR).
Swap one crypto for another (e.g., BTC to ETH — both legs are disposals).
Spend crypto to buy goods or services.
Gift crypto to someone (at market value, unless to your spouse).

Simply buying crypto with fiat, or transferring between your own wallets, is not a disposal.

Share pooling applies to crypto

HMRC applies the same share matching rules to crypto as to shares: same-day rule first, then the 30-day bed and breakfast rule, then Section 104 pool. Each type of token (Bitcoin, Ethereum, etc.) has its own pool — just like each company’s shares have a separate pool.

This is explicitly stated in HMRC’s Cryptoassets Manual at CRYPTO22200.

The 30-day rule is particularly relevant for crypto traders because the markets run 24/7. If you sell Bitcoin on Monday and buy it back on Saturday, the 30-day rule applies.

DeFi, staking, and airdrops

Staking rewards and airdrops are generally treated as income (not capital gains) at the market value when received. They enter your pool at that value. When you later sell, any gain from the income-entry price is subject to CGT.

DeFi transactions (lending, liquidity provision, yield farming) are still a grey area. HMRC’s guidance is evolving, but the principle is: if you dispose of tokens, there’s a CGT event. If you receive tokens as income, there’s an income tax event. The DeFi section of the Cryptoassets Manual has the latest guidance.

Exchange rates for crypto

If your exchange reports values in USD (as most do), you need to convert to GBP using HMRC monthly exchange rates — the same as for US share trades.

Crypto-to-crypto swaps are trickier. You need the GBP value of both tokens at the time of the swap. Most people use the exchange’s reported USD value and convert to GBP with the HMRC monthly rate.

The £3,000 exemption applies

Crypto gains use the same £3,000 annual exemption as shares. They’re combined — £2,000 of share gains plus £2,000 of crypto gains equals £4,000 total, with £3,000 exempt and £1,000 taxable. You don’t get a separate allowance for crypto.

Report crypto gains in the “Other property, assets and gains” section of SA108 (Boxes 14-22). The reporting thresholds are the same — report if proceeds exceed £12,000 or gains exceed £3,000.

HMRC enforcement

HMRC isn’t bluffing about crypto compliance. They’ve used data sharing agreements with major exchanges (Coinbase, Binance, Kraken) to identify UK users. They’ve issued thousands of “nudge letters” to taxpayers they believe haven’t declared crypto gains. The BBC has reported on HMRC’s crypto enforcement drive, and penalties for non-disclosure are severe.

If you’ve been trading crypto and haven’t reported gains in previous years, consider making a voluntary disclosure to HMRC. Penalties are lower for voluntary disclosure than for being caught.

TaxBull and crypto

TaxBull is currently focused on share and option CGT from broker CSVs. For dedicated crypto tax calculation, specialist tools like Koinly or CoinTracker can handle the complexity of multiple exchanges and DeFi protocols. Your crypto gains and share gains then combine on your SA108 for the total CGT picture.

Crypto tax is a fast-moving area. HMRC’s guidance is updated regularly. Check gov.uk/tax-on-cryptoassets for the latest. This is general information, not advice.