10% off Self Assessment this July. Just 169 £152.

Limited time only. T&Cs apply.  Learn more

10% off Self Assessment this July. Just <s>169</s> £152.

Are bitcoins tax-free?

  • 3 min read
  • Last updated 29 Jan 2024

If you’re thinking of investing in cryptocurrency then you might be asking yourself, ‘are bitcoins tax-free?’ 

The value of these types of cryptoassets has continued to grow significantly, and as a result, more and more people are looking to buy and sell them. If you’re one of the lucky few who invested in Bitcoin early, then you might think that any profits you make from trading them are tax-free. 

Unfortunately, you’re wrong!

Many people think of cryptocurrency profits as being similar to gambling or a lottery type win; which would make them not taxable in the eyes of HMRC. What many people do not realise is that this isn’t true. Like any form of asset, there are various different tax implications attached to selling/exchanging Bitcoin.

What is Bitcoin?

Bitcoin is a form of cryptocurrency. It’s a token that’s completely virtual, but like pound sterling, it can be used as a payment for goods and services with some retailers.

Are bitcoins tax-free and if not, which tax will I pay?

HMRC have made it very clear that bitcoins and other types of cryptoassets are not tax-free, and are subject to tax like any other asset. However, although they are considered to be a form of digital currency, HMRC doesn’t recognise Bitcoin as “money”. Instead, it’s considered a type of personal investment, like property or shares. 

You’ll have to pay tax on your bitcoins if:

  1. You’ve sold/exchanged Bitcoin and made a profit. Any profit you make will be subject to Capital Gains Tax (CGT). You’ll only pay CGT on the profit above your Capital Gains Tax allowance. In the 2024/25 tax year, the CGT allowance is £3,000 (previously halved from the £6,000, the 23/24 tax year allowance).
  1. You’ve received Bitcoin from your employer as a type of wage payment. These count as earnings in the eyes of HMRC. You’ll be required to pay Income Tax and National Insurance contributions based on the value of what you receive.
  1. You’re trading Bitcoin at a high frequency. This is because HMRC see it as a form of financial trade – you’re essentially making enough money to earn an income from it. In this instance you’ll have to pay Income Tax and National Insurance on the profits you make.

Do I need to tell HMRC about my Bitcoin profits?

Generally, the answer is yes. 

If you’re a UK tax resident and you make more than the Capital Gains Tax allowance, then you’ll need to inform HMRC. You do this by paying CGT through a self-assessment tax return. 

It’s important to disclose all information about your Bitcoin trading to HMRC, as if you don’t, it could result in a hefty fine! In the past few years there has been an increasing number of HMRC enquiries focussing on those who buy and sell crypto assets and who have not paid the correct tax.

You can work out how much Capital Gains Tax you need to pay using our CGT tax calculator below!

Your situation

Outlined number oneImage of an arrow
How did you make money?
Profit from capital gains
Annual salary
Other income

Tax and profit

Outlined number two
  • Your profit from
    £3,000 tax-free CGT allowance
  • Capital Gains Tax to pay
  • Profit after tax

How your capital gains tax is calculated

The total capital gains tax (CGT) you owe depends on two things:

  • How much you earn in total
  • What type of assets you sell

Your overall earnings determine how much of your capital gains are taxed at – 10% or 20%.
Our capital gains tax rates guide explains this in more detail.

In your case where your capital gains from shares were £20,000 and your total annual earnings were £69,000:

Capital gains tax (CGT) breakdown

You pay no CGT on the first £3,000 that you make

You pay £127 at 10% tax rate for the next £1,270 of your capital gains

You pay £3,146 at 20% tax rate on the remaining £15,730 of your capital gains

Tax bill amount £3,273
I want to pay by
Savings frequency

You need to save

£4.91 per day

to pay your £3,273.00 tax bill by 31/1/2026 which is in 666 days

What if I’ve bought/sold bitcoins through my business?

If you run a business that’s carrying out various ‘activities’ with Bitcoin and/or other types of cryptoassets, then your company will have to pay tax on them. HMRC state that these activities include:

  • The buying and selling of Bitcoin
  • Exchanging Bitcoin for other assets (including other types of cryptoassets)
  • The ‘mining’ of Bitcoin
  • Providing goods or services in return for Bitcoin

The type of tax that your company will have to pay depends on who is involved in the business and the types of activities that it carries out. It’s likely that your company will be liable to pay one of the following types of tax:

  • Capital Gains Tax
  • Corporation Tax
  • Corporation Tax on Chargeable Gains
  • Income Tax 
  • National Insurance Contributions
  • Stamp Taxes
  • VAT

As for the actual amount of tax your company will pay, this depends on various factors, such as business income, expenditure, profits and gains. It’s important that you declare this to HMRC on a company tax return, or a Self Assessment tax return if you’re a sole trader.

TaxScouts Newsletter

Want regular tips from us?

Sign up for important updates, deadline reminders and basic tax hacks sent straight to your inbox.

"*" indicates required fields

This field is for validation purposes and should be left unchanged.