Is there VAT on buying or selling cryptocurrency?

Cryptocurrency is now part of everyday finance for many UK investors and businesses. From online stores accepting Bitcoin to companies holding crypto on their balance sheets, the tax treatment of these digital assets can be complex. One question often asked is whether Value Added Tax (VAT) applies to the purchase or sale of cryptocurrency.

The short answer is that in most cases, buying and selling cryptocurrency is exempt from VAT. However, there are important exceptions and specific reporting obligations depending on whether you’re an individual investor, trader, or business. This article explains the UK VAT rules on cryptocurrency, how HMRC views digital assets, and what businesses must do to stay compliant.

HMRC’s approach to cryptocurrency and VAT

HMRC does not treat cryptocurrency as money or legal tender. Instead, digital currencies such as Bitcoin and Ethereum are viewed as exchange tokens, meaning they are used as a means of payment rather than representing any legal currency.

Because of this classification, HMRC applies VAT rules differently from traditional financial services. The general principle is that the exchange of cryptocurrency itself is outside the scope of VAT, as it is treated like the exchange of traditional currencies. This position aligns with European Court of Justice rulings prior to Brexit, which HMRC continues to follow.

In practice, this means that if you buy or sell cryptocurrency for investment or trading purposes, no VAT is charged on the transaction amount. You may still need to consider capital gains or income tax, but VAT is not applied to the value of the crypto being traded.

Buying cryptocurrency and VAT

When you buy cryptocurrency from an exchange or peer-to-peer platform, there is no VAT on the purchase itself. The crypto is treated as a medium of exchange, not a supply of goods or services.

However, you may still see VAT applied to fees or commissions charged by the exchange or broker. These are treated as taxable supplies of services. For example, if you pay a trading fee or a withdrawal charge, the exchange may include VAT depending on its location and registration status.

If you buy from a UK-based exchange that is VAT registered, the fee will usually include VAT at the standard rate (currently 20%). If the exchange is based outside the UK, VAT may not apply or may fall under the reverse charge mechanism for UK businesses.

Selling cryptocurrency and VAT

Selling cryptocurrency for pounds or another digital token is also exempt from VAT. The transaction itself is considered a currency exchange. The key point is that the crypto is not a product or service—it’s an asset used to facilitate payments or store value.

That said, if you are trading cryptocurrency as a business, there are still VAT considerations around any fees or commissions you charge to customers. For instance, if your business acts as a broker or exchange and earns income from transaction fees, that income may be subject to VAT.

Using cryptocurrency to pay for goods or services

The situation changes when cryptocurrency is used as payment for goods or services. In that case, VAT applies in the same way as if the buyer had paid in pounds sterling.

For example, if you sell a product online for £100 and the customer pays in Bitcoin, you must account for VAT on that £100 sale. The crypto’s value at the time of the transaction determines how much VAT you owe. The fact that payment was in crypto does not change the VAT treatment—it is still a sale of goods or services within the scope of VAT.

The business receiving crypto must:

• Convert the crypto’s value into pounds at the time of the sale.

• Record the sale value in their VAT records.

• Include it in their VAT return in the normal way.

If the crypto’s value later rises or falls, that change has no impact on the VAT already accounted for—it affects capital gains or losses instead.

VAT on crypto mining activities

Cryptocurrency mining has its own unique VAT treatment. In most cases, mining is outside the scope of VAT because there is no identifiable customer paying for the service. Miners validate transactions and receive rewards in the form of newly created tokens or transaction fees.

Since these rewards are not directly paid by a specific party for a service, HMRC views them as being outside VAT scope. However, if a miner provides services directly to another business for payment, such as cloud mining contracts, VAT may apply to those service fees.

VAT for crypto exchanges and service providers

Crypto exchanges and wallet providers must take extra care when assessing their VAT obligations. Their core activity—facilitating the buying and selling of cryptocurrency—is typically exempt from VAT. But additional services, such as advisory fees, transaction handling, or premium features, may fall within VAT scope.

If a UK-based business earns revenue from these services, it must check whether:

• The service is supplied to UK or overseas customers.

• The place of supply rules apply.

• VAT registration thresholds have been reached.

Once registered, the business must charge VAT on taxable supplies and can reclaim VAT on eligible expenses.

VAT on NFTs and digital assets other than exchange tokens

Not all digital assets enjoy the same VAT treatment as exchange tokens like Bitcoin. Non-fungible tokens (NFTs), for example, are treated differently. When an NFT represents ownership of a digital artwork or asset, it is considered a supply of digital services, which falls within VAT scope.

This means businesses selling NFTs to UK consumers must charge VAT at the standard rate on the sale price. Sales to customers outside the UK may be zero-rated depending on the destination and type of customer.

It’s crucial to understand that VAT exemptions for cryptocurrencies do not automatically extend to other digital assets. Each case must be assessed individually.

Business accounting and VAT reporting for crypto transactions

If your business accepts or trades in crypto, VAT must still be recorded accurately even when the transaction itself is exempt. This involves converting crypto values into pounds at the market rate at the time of the transaction and recording them as part of your VAT records.

You should keep:

• The date of each transaction.

• The crypto amount and pound value.

• Exchange rate used.

• Any VAT charged on associated fees or goods.

• Documentation showing the purpose of each transaction.

Good record keeping ensures your VAT returns remain accurate and will be invaluable if HMRC conducts a review or audit.

When VAT might apply indirectly

There are situations where VAT doesn’t apply directly to the crypto transaction but does apply to related activities. Examples include:

• Advisory or consultancy services relating to crypto.

• Software or app subscriptions for managing digital assets.

• Storage or custody services that hold crypto securely.

These services are taxable under normal VAT rules, even though the underlying crypto exchanges are exempt. Businesses providing these services should register for VAT if their turnover exceeds the current threshold (£90,000 as of 2025).

International considerations

Cross-border crypto transactions can complicate VAT reporting. UK businesses dealing with overseas customers must follow place-of-supply rules to determine where VAT applies. For instance, if a UK crypto consultancy provides services to a business customer outside the UK, the supply may be treated as outside the scope of UK VAT.

If the service is supplied to a non-business customer (such as an individual) outside the UK, VAT may still apply depending on the nature of the service and where it is consumed.

Record keeping and HMRC compliance

HMRC expects all businesses that deal in crypto to maintain full digital records for VAT and accounting purposes. These must include:

• A breakdown of crypto received or paid for taxable transactions.

• Details of any exchange or transaction fees.

• Supporting documentation showing the conversion rate used for pound values.

Maintaining transparent records is essential for demonstrating compliance and avoiding penalties in the event of an audit.

How VAT interacts with other crypto taxes

While VAT generally doesn’t apply to the buying or selling of crypto, it’s important not to overlook other taxes. Depending on how you use your crypto, you may be subject to Capital Gains Tax, Income Tax, or Corporation Tax.

For example, selling crypto at a profit creates a taxable gain, even if no VAT applies. Similarly, earning crypto through mining, staking, or providing services counts as income. Understanding how VAT fits within the wider tax picture ensures you remain compliant across all areas.

Getting professional help

The VAT treatment of cryptocurrency can be complex, particularly for businesses that deal in digital assets or accept crypto payments. Professional guidance can help you classify transactions correctly, reclaim eligible input VAT, and ensure all records meet HMRC’s standards.

A qualified accountant familiar with both crypto and VAT rules can help you:

• Identify which transactions fall inside or outside VAT scope.

• Calculate VAT on fees and services accurately.

• Set up record keeping systems for digital assets.

• Avoid costly mistakes that might trigger penalties.

The bottom line

In most cases, buying and selling cryptocurrency is exempt from VAT in the UK. The tax applies only to associated services, fees, or when crypto is used to pay for goods and services. Businesses must still keep accurate records and assess VAT obligations for any related income streams.

With the right approach and clear understanding of HMRC’s guidance, individuals and companies can handle their crypto activities confidently while staying fully VAT compliant.