Can I Gift Cryptocurrency Without Paying Tax?

Introduction

Cryptocurrency has become a popular way to invest and transfer wealth, but many people are unsure how it is treated for tax purposes. If you are thinking about gifting cryptocurrency to a family member or friend, it is important to understand how HMRC views such transactions.

While gifts of cryptocurrency can sometimes be made without immediate tax charges, there are circumstances where Capital Gains Tax (CGT) or Inheritance Tax (IHT) may apply. This article explains how the rules work, when tax might be due, and how to plan gifts of crypto safely and efficiently.

How HMRC Treats Cryptocurrency

HMRC treats cryptocurrency such as Bitcoin, Ethereum, or other tokens as a capital asset, not as money. This means that most transactions involving crypto — including sales, trades, or gifts — are potentially subject to Capital Gains Tax.

For tax purposes, gifting crypto is considered a disposal. This means that even though you are not receiving payment, HMRC views it as if you sold the asset at its market value on the date of the gift.

When Gifting Cryptocurrency Triggers Capital Gains Tax

You may need to pay CGT if:

• You give crypto to someone other than your spouse or civil partner.

• The crypto has increased in value since you acquired it.

The gain is calculated as:
Market value at the date of the gift Original purchase cost = Chargeable gain

If your total gains for the tax year exceed the annual CGT allowance (currently £3,000 for the 2024 25 tax year), you will pay tax at 10% (basic-rate taxpayers) or 20% (higher- and additional-rate taxpayers).

Example Scenario

Sarah bought 1 Bitcoin for £5,000 in 2020. By 2025, it is worth £25,000. She decides to gift it to her brother.

HMRC treats this as a disposal at market value (£25,000). The gain is £20,000 (£25,000 £5,000). After applying her £3,000 CGT allowance, Sarah must pay CGT on £17,000. If she is a higher-rate taxpayer, her tax bill would be £3,400 (20% of £17,000).

Even though no money changed hands, Sarah still owes Capital Gains Tax because the crypto increased in value.

Gifts to a Spouse or Civil Partner

Gifts of cryptocurrency between spouses or civil partners are treated differently. They are exempt from Capital Gains Tax, provided you are both UK residents.

In this case:

• The recipient inherits the crypto at your original purchase cost.

• No tax is due at the time of the gift.

However, when the recipient later sells or disposes of the cryptocurrency, any gains will be calculated from the original acquisition price.

For example, if you bought Bitcoin for £5,000 and gift it to your spouse when it is worth £25,000, there is no tax now. But if your spouse sells it later for £30,000, their gain is £25,000 (£30,000 £5,000).

Gifting Cryptocurrency and Inheritance Tax

Gifting crypto can also have implications for Inheritance Tax, depending on how long you live after making the gift.

A gift of cryptocurrency is treated like any other potentially exempt transfer (PET) for IHT purposes.

• If you live for seven years after making the gift, it is fully exempt from Inheritance Tax.

• If you die within seven years, its value may be added back into your estate, and IHT could be payable.

For example, if you gift crypto worth £50,000 to your child and die five years later, the gift may be subject to IHT, although taper relief could reduce the tax depending on the time elapsed since the gift.

When You Can Gift Cryptocurrency Without Paying Tax

You can gift cryptocurrency without triggering an immediate tax charge in the following situations:

• The gift is to your spouse or civil partner (CGT exempt).

• Your total capital gains for the tax year are within the annual allowance (£3,000).

• You are giving cryptocurrency worth less than your purchase cost (no gain to tax).

• You donate it directly to a UK-registered charity, which is usually CGT exempt.

However, even if no tax is due, you must keep accurate records of the transaction, including dates, amounts, and market values.

Gifting Cryptocurrency to Charity

Donating cryptocurrency to a charity registered with HMRC can qualify for both Capital Gains Tax and Income Tax reliefs.

• The gift is exempt from CGT, regardless of the asset’s gain in value.

• You may also claim Income Tax relief equal to the market value of the donation if you pay tax through PAYE or Self Assessment.

Always confirm that the recipient organisation is an HMRC-recognised charity before making a donation.

Keeping Records

HMRC expects taxpayers to maintain detailed records of all crypto transactions, including gifts. You should record:

• The type and quantity of cryptocurrency gifted

• The date of acquisition and the date of the gift

• The original purchase cost

• The market value at the date of the gift

• The identity of the recipient

Keeping accurate records is essential, especially if you later need to prove that the transaction was exempt or if you need to calculate future gains.

Reporting Gifts to HMRC

If you make a gift that results in a taxable gain, you must report it to HMRC:

• Through your Self Assessment tax return, if you already file one, or

• By completing a one-off Capital Gains Tax report via your HMRC online account.

You should report and pay any CGT owed by 31 January following the end of the tax year in which the gift was made.

The Role of an Accountant

An accountant can help you:

• Calculate the potential tax due on a cryptocurrency gift.

• Determine whether exemptions or reliefs apply.

• Ensure your records meet HMRC requirements.

• Report gains correctly to HMRC.

• Plan gifts strategically to minimise future tax exposure.

As cryptocurrency values can fluctuate dramatically, professional advice can help ensure you do not overpay tax or miss opportunities for relief.

Conclusion

You can gift cryptocurrency without paying tax in some situations, such as when transferring assets to your spouse, donating to charity, or keeping within your CGT allowance. However, most other gifts are treated as disposals and may trigger Capital Gains Tax if the asset has increased in value.

Inheritance Tax can also apply if you die within seven years of making the gift. For this reason, careful planning and record keeping are essential. Seeking advice from an accountant or tax specialist will help you gift cryptocurrency safely, efficiently, and in full compliance with HMRC rules.