How Are Crypto Staking Rewards Taxed in the UK

At Towerstone, we provide specialist crypto accountancy services for UK investors and businesses. We have written this article to explain whether staking rewards are taxed as income or gains, helping you understand the tax and reporting position.

Crypto staking is one of the most misunderstood areas of UK crypto tax and in my opinion it causes more accidental non-compliance than almost anything else in this space. Many people start staking because it feels passive. You lock tokens away, rewards appear, and it does not feel like income in the traditional sense. From experience, that is exactly why it catches people out.

I regularly speak to individuals who have staked for months or even years without realising that HMRC expects those rewards to be taxed. Some assume tax only applies when they sell. Others think staking is similar to interest inside an ISA. Neither assumption is correct.

In this guide, I am going to explain clearly how crypto staking rewards are taxed in the UK, when tax arises, what type of tax applies, how values are calculated, and what happens when you later sell the rewards. I will also share common mistakes I see and how to approach staking in a way that stays compliant without paying more tax than necessary.

How HMRC Views Crypto Staking

The starting point is how HMRC classifies cryptoassets and staking activity.

In the UK, cryptoassets are treated as assets rather than currency. HMRC applies existing tax principles to crypto rather than creating an entirely new system.

Official guidance on cryptoassets is issued by HM Revenue & Customs and published via GOV.UK.

From experience, once you accept that staking rewards are not ignored or invisible for tax purposes, the rest of the framework becomes easier to understand.

What Is Crypto Staking in Simple Terms?

Crypto staking usually involves locking tokens into a blockchain network to help validate transactions or secure the network. In return, you receive rewards, often paid in the same token.

Examples include:

Staking ETH on a proof of stake network

Delegating tokens to a validator

Staking via an exchange or platform

Participating in liquidity or protocol staking mechanisms

From a tax perspective, the key point is that you receive something of value as a result of your participation.

In HMRC’s view, that value matters.

Is Crypto Staking Taxable in the UK?

Yes, in most cases crypto staking rewards are taxable in the UK.

The critical question is not whether they are taxable but how they are taxed.

From experience, most individuals are taxed under income tax rules rather than capital gains tax at the point the reward is received.

Income Tax and Staking Rewards

HMRC generally treats staking rewards as income when they are received.

This means:

Income tax arises at the point the reward becomes available to you

The value is measured in pounds sterling at that time

The income must be declared on your tax return

It does not matter whether you cash out the reward or leave it staked. The taxable event occurs when you receive the reward and have control over it.

In my opinion, this is the single most important concept for people to understand.

When Are Staking Rewards Considered Received?

This is a practical question I am asked frequently.

From experience, HMRC looks at when the reward is:

Credited to your wallet or account

Available for you to use, sell, or transfer

Under your control rather than locked or inaccessible

If rewards are automatically restaked but still accessible, HMRC is likely to treat them as received.

If rewards are genuinely locked and cannot be accessed, the position can be more nuanced but this requires careful analysis.

How Do You Value Staking Rewards?

Staking rewards must be valued in pounds at the time they are received.

This usually involves:

Taking the market value of the token

Using a reasonable exchange rate

Applying that value consistently

From experience, this becomes challenging where rewards are frequent or where tokens are illiquid.

HMRC does not expect perfection but it does expect a reasonable and consistent method.

What If Staking Rewards Are Small?

Even small rewards are technically taxable.

However, whether tax is actually payable depends on your wider income and allowances.

If your total income is below personal allowances, income tax may not be due but reporting may still be required.

In my opinion, the mistake people make is assuming small equals irrelevant. Multiple small rewards can add up very quickly.

Are Staking Rewards Always Income?

In most personal cases, yes.

However, the context matters.

HMRC looks at factors such as:

Scale of activity

Degree of organisation

Intention to profit

Repetition and regularity

Commercial characteristics

If staking activity is extensive and organised, it could be treated as a trade. This is rare for individuals but more common for businesses.

From experience, most people staking personally fall under miscellaneous income rules rather than trading income.

Staking Rewards and Self Assessment

If you receive staking rewards, you will usually need to declare them through self assessment.

This involves:

Reporting the value of rewards as income

Paying income tax at your marginal rate

Keeping detailed records

Staking rewards are not ignored simply because they are crypto.

In my opinion, anyone staking regularly should assume self assessment is required unless advised otherwise.

What Happens When You Later Sell Staking Rewards?

This is where many people get confused and accidentally underreport tax.

Staking rewards are taxed twice but in two different ways.

First stage
Income tax is charged when the reward is received.

Second stage
Capital gains tax may apply when you later dispose of the reward.

The base cost for capital gains purposes is the value that was taxed as income.

From experience, people often forget the second stage or fail to keep the base cost data.

Capital Gains Tax on Disposing of Staking Rewards

When you sell, swap, or spend staking rewards, you are making a disposal.

You calculate the gain or loss by comparing:

The value at disposal

The value when the reward was received and taxed as income

If the token has increased in value, capital gains tax may apply.

If it has fallen in value, a capital loss may arise.

UK pooling rules apply, meaning tokens of the same type are grouped together.

What If You Never Sell the Rewards?

Even if you never sell staking rewards, income tax still applies at the point of receipt.

This surprises many people.

From experience, I see individuals who have large unrealised positions and unexpected tax bills because rewards were received during a high price period.

This is why cash flow planning is so important with staking.

Staking Through Exchanges Versus Wallets

From a tax perspective, it does not usually matter whether you stake through:

A centralised exchange

A decentralised protocol

A personal wallet

A validator or delegation service

What matters is whether you receive a reward and have control over it.

However, record keeping is often easier with exchanges and much harder with decentralised platforms.

In my opinion, difficulty tracking data is not a valid reason to ignore tax.

Locked Staking and Vesting Periods

Some staking arrangements involve lockups or vesting periods.

The tax treatment depends on whether:

Rewards are credited but locked

Rewards are not credited until unlock

You have a legal or practical right to the reward

From experience, this is an area where professional advice is valuable because the facts matter.

HMRC focuses on entitlement and control rather than marketing descriptions.

Are Staking Rewards Subject to National Insurance?

For most individuals, staking rewards taxed as miscellaneous income do not attract National Insurance.

However, if staking activity is treated as trading income, Class 2 and Class 4 National Insurance may apply.

From experience, this is uncommon but not impossible.

Staking Rewards for Limited Companies

If a limited company receives staking rewards, the tax treatment changes.

Rewards are usually treated as taxable income for corporation tax purposes.

This includes:

Recognising income in accounts

Valuing rewards at receipt

Paying corporation tax on profits

Later disposals may also create chargeable gains within the company.

In my opinion, companies need a clear accounting policy for crypto activity from day one.

VAT and Staking Rewards

VAT does not generally apply to staking rewards.

HMRC does not treat staking as a supply for VAT purposes in most cases.

This is one area where people worry unnecessarily.

Record Keeping for Staking

From experience, good records are essential.

You should keep:

Dates rewards were received

Token quantities

Pound sterling value at receipt

Source of valuation

Wallet addresses

Platform statements

Transaction hashes where available

Without records, accurate reporting becomes almost impossible.

Common Mistakes I See With Staking Tax

From experience, the most common issues include:

Assuming tax only applies when selling

Ignoring small but frequent rewards

Failing to value rewards properly

Forgetting the second stage capital gains tax

Not setting aside funds for tax

Losing access to historical data

Mixing personal and business activity

These mistakes often lead to stress rather than savings.

What If You Have Not Declared Staking Rewards?

This is very common.

Many people started staking before they understood the rules.

HMRC allows voluntary disclosure and amended returns.

Correcting past issues usually involves:

Reconstructing reward history

Valuing rewards at receipt

Amending tax returns

Paying any tax and interest due

From experience, voluntary disclosure leads to far better outcomes than waiting for HMRC to make contact.

Practical Tips From Experience

Based on years of dealing with crypto tax issues, my advice is:

Assume staking rewards are taxable income

Track rewards from day one

Set aside cash for tax regularly

Do not rely on exchange summaries alone

Seek advice if activity becomes complex

Do not ignore historic issues

In my opinion, staking without tax planning is asking for trouble.

My Honest View From Experience

Staking rewards feel passive but HMRC does not treat them that way.

From experience, the biggest problems arise not from tax rates but from timing. People receive rewards when prices are high and only realise tax is due when prices fall.

In my opinion, staking should always be approached with an understanding of the tax cost alongside the reward rate.

Crypto rewards are not free money once tax is taken into account.

Where this leaves you

So how are crypto staking rewards taxed in the UK?

In most cases, they are taxed as income when received and may also be subject to capital gains tax when later disposed of.

The rules are not designed to catch people out but they do require effort and record keeping.

From experience, the people who handle staking best are those who treat tax as part of the process rather than an afterthought.

If you understand when tax arises, how values are calculated, and how the two stages of tax interact, staking becomes manageable rather than stressful.

Clarity early on makes all the difference.

If you would like to explore related investing and crypto guidance, you may find How are crypto transactions treated for company tax and How are NFTs taxed in the UK useful. For broader investing context, visit our stocks and shares guidance hub.