What Is HMRC’s View on Crypto Mining Income

What crypto mining involves

Crypto mining is the process of verifying blockchain transactions and adding new blocks to the network in return for rewards. Miners use computing power to solve complex mathematical problems, and successful participants receive newly created cryptocurrency along with transaction fees.

In the UK, mining can take several forms:

Solo mining: Running your own hardware to mine coins directly.

Pool mining: Joining others to combine computing power and share rewards.

Cloud mining: Renting computing power from a third party to earn rewards remotely.

Regardless of the method, HMRC treats crypto earned through mining as taxable income.

HMRC’s general position on mining income

HMRC’s position is clear: cryptocurrency received through mining is taxable as income when it is earned. The income is valued at the market rate in pounds sterling on the date the mining reward is received.

This applies whether the reward is a new token or transaction fees paid by other network users.

The key distinction HMRC makes is whether your mining activity constitutes a hobby or a business.

Hobby mining

If you mine crypto occasionally or on a small scale, HMRC is likely to view it as a hobby rather than a commercial operation. In this case:

The rewards you earn are treated as miscellaneous income and subject to Income Tax.

You can deduct reasonable expenses such as electricity, equipment costs, and mining pool fees, but only to the extent that they relate directly to mining.

You do not have to pay National Insurance contributions on hobby income.

Hobby mining is typically characterised by limited equipment, small-scale rewards, and no business structure.

Mining as a business

If you mine crypto regularly with significant investment, organisation, and intent to profit, HMRC may classify your activity as a trading business.

In this case:

Your mining income is taxed as trading income.

You must pay Income Tax and Class 2 and Class 4 National Insurance contributions on your profits.

You can claim a wider range of expenses, including hardware, software, electricity, and maintenance costs.

HMRC decides whether mining qualifies as a business based on the badges of trade, which include:

Frequency and scale of activity

Commercial intent and profit motive

Organisation and business structure

Evidence of ongoing operations rather than casual participation

If your mining is structured as a limited company, profits will be subject to Corporation Tax instead.

How to value mining income

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

For example, if you mine 0.05 Bitcoin when it is worth £800, that £800 counts as taxable income.

You can use the exchange rate from a reputable source or the price listed on the platform you use to receive payments. It is essential to keep detailed records of:

The date and time rewards were received

The market value in pounds at that time

Transaction or network fees

The wallet address that received the crypto

These records will form the basis of your tax return and help you calculate later capital gains or losses.

Capital Gains Tax on mined crypto

When you later sell, swap, or spend the crypto you mined, you may also owe Capital Gains Tax (CGT).

The cost basis for CGT purposes is the market value of the crypto at the time you received it. The difference between this value and the disposal value is your taxable gain.

Example

You mined 0.1 Ethereum worth £200 in March 2024. You sell it in December 2025 for £500.

The £200 at the time of mining was taxable as income.

The £300 increase in value (£500 £200) is a capital gain and subject to CGT.

If your total gains across all assets in a tax year are below the £3,000 allowance (2025 26), you will not owe CGT.

Allowable expenses for miners

If your mining is treated as a hobby, you can claim certain limited expenses against your miscellaneous income.

If you run mining as a business, you can claim all legitimate business expenses incurred wholly and exclusively for mining. These may include:

Electricity and internet costs directly linked to mining

Hardware, cooling systems, and maintenance

Mining software or pool fees

Office or workspace expenses if dedicated to mining activity

You must keep receipts and records to support any expense claims.

Mining and VAT

For individuals, cryptocurrency mining is outside the scope of VAT because there is no direct exchange of goods or services with a specific customer.

However, if you operate a large-scale mining business that provides additional services, such as hosting or cloud computing, VAT may apply depending on the nature of your business activities.

Reporting mining income to HMRC

You must report your crypto mining income through your Self Assessment tax return.

Hobby miners should report income under the Other Income section.

Business miners should use the Self Employment section.

Company miners must include it in their corporation tax return.

You will need to provide:

The total crypto income received during the tax year

The sterling value of rewards when received

Details of allowable expenses

Any resulting profit or loss

If your mining income is small (for example, under £1,000), you may fall under the trading allowance, which exempts the first £1,000 of income from tax. However, if your income exceeds this threshold, you must declare it.

Record keeping requirements

HMRC expects miners to keep detailed records to support their tax filings. You should record:

Dates and values of mining rewards

The exchange rate used to calculate sterling value

Wallet addresses and transaction IDs

Equipment and electricity costs

Any crypto later sold or exchanged

Records must be kept for at least five years after the tax return deadline.

Using crypto tax software can make this process easier, as it automatically tracks rewards and converts values into pounds.

What happens if you do not declare mining income

Failing to report taxable mining income can lead to penalties, interest charges, or HMRC investigations. The size of the penalty depends on whether the omission was careless, deliberate, or concealed.

Given that HMRC now receives data from crypto exchanges and mining platforms, unreported income is easier to detect. Declaring your income voluntarily, even if small, is always the best approach.

Final thoughts

HMRC treats cryptocurrency mining as taxable income, whether it is a small hobby or a large commercial operation. The key difference lies in whether your activity is casual or qualifies as a trade. Hobby miners pay Income Tax on miscellaneous income, while professional miners are taxed as businesses and may also owe National Insurance.

When mined crypto is later sold, any increase in value is subject to Capital Gains Tax.

To stay compliant, record the value of every reward in pounds, report it accurately on your Self Assessment, and keep proof of all expenses and transactions. With proper record keeping and professional advice, you can meet your tax obligations and avoid unwanted penalties from HMRC.