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Tax guide to buying crypto (UK)

  • 3 min read
  • Last updated 16 Apr 2024

If you’re thinking about buying crypto, you’re not alone! But before diving into the ultra-modern world of digital currency, here is your tax guide to buying crypto in the UK.

Wait, is buying crypto taxable (UK)?

Buying crypto alone doesn’t automatically mean you’ll have to pay tax, but there are some circumstances where it can catch the eye of Providence HMRC.

An example of this is regularly buying and selling crypto for profit. This makes you a trader in the eyes of HMRC and you’ll be liable for income tax. 

You’ll be taxed according to the 2023/2024 income tax rates:

BandIncomeTax rate 
Basic rate£12,571 – £50,27020%
Higher rate£50,271 – £125,14040%
Additional rateOver £125,14145%

But not everyone who buys and sells crypto will be considered a trader. If you’re trading often and these trades make up most of your income, well, congrats! You officially get to call yourself a trader ✔️

… but you’ll also have to pay income tax.

Here’s a little visual to get you thinking and then we’ll get into the details:

tax on crypto 2024/25

Do you have to report crypto you bought but didn’t sell?

Usually, you’ll only have to report crypto that you sold for profit over £3,000 for the tax year 2024/2025 (previously halved from £6,000 in the 23/24 tax year). In this case, you pay capital gains tax on that profit. 

But, there are some cases where you report your crypto income even if you decide to hold onto it. 

One example is if your employer pays your wages fully or partially in crypto. In this case, your crypto will be treated as ordinary income (like GBP) and taxed at the regular income tax rates.

Another example is mining crypto. Although you don’t actually buy crypto when mining, it’s another way to possess crypto – and it has to be reported to HMRC even if you don’t decide to sell.

What on earth is mining crypto? 😅

Basically, crypto mining is the way to get new coins into circulation for some cryptocurrencies. Kind of like how the bank of England prints £20 notes💷 But also not like the Bank of England because for some coins, like Bitcoin, there’s only a finite number in existence… 

But anyway, we digress.

Once you’ve solved potentially the most difficult mathematical problems known to man, crypto is generated and can be distributed (the miner also may be rewarded with some coins).

Fun fact: the term was inspired by gold mining, but funnily enough, there are no excavators involved. 🛠️ Just an insane level of computing powers!

The two types of crypto miners

  • Business miners – business miners carry out the process on a much larger scale, so they’ll almost definitely be subject to income tax and national insurance on their crypto once they’ve cracked the code.
  • Hobby miners – in comparison, hobby miners have to report this income as ‘miscellaneous income’ through a Self Assessment tax return and may not have to pay national insurance on their crypto. Hobby miners are entitled to claim the Trading Allowance.

Nonetheless, both types of miners will have to pay capital gains tax if they decide to sell their crypto and obtain profit which exceeds the £3,000 allowance.

Does HMRC know about my crypto?

Crypto isn’t created or circulated by the government – so of course they don’t know about my crypto! 😌 Right? 

Wrong. They do. 

HMRC operates a data sharing programme with all UK exchanges. They also have access to crypto transaction data all the way back to 2014. 

For this reason, it’s important to report your crypto earnings where necessary and pay any due tax. It’ll save you a lot of hassle in the long run (and coins).

Need tax help? 👀

If you’re not quite sure if you have to pay tax on your crypto, we can help! And if you need, we can even file your tax return too. Find out more about our services here.

Filing a crypto tax return?

Well, listen up. We teamed up with Koinly to bring you a quick and easy solution: a tool to create crypto tax reports. Want to get your crypto tax report generated and tax return filed all in one? Look no further. Up to 1000 transactions totally free!

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