What is the tax rate on cryptocurrency profits?

The rise of cryptocurrency has created new opportunities for investors, traders, and businesses across the UK. Whether you’re holding Bitcoin for the long term or running a business that deals in digital assets, understanding how your profits are taxed is essential. HMRC has clear rules on when and how crypto profits are taxed, and the rates you pay depend on your activity and tax status.

This article explains how HMRC classifies crypto gains, what tax rates apply, and how individuals and businesses should calculate and report their profits.

How HMRC views cryptocurrency profits

HMRC does not treat cryptocurrency as currency or legal tender. Instead, it is considered a digital asset. This means that when you sell, exchange, or dispose of crypto, you may be liable for Capital Gains Tax (CGT) or Income Tax, depending on your situation.

For most individuals, crypto activity falls under capital gains. This means tax is charged on the profit made when you sell your crypto, not on the total sale amount. However, if you trade crypto regularly or receive it as payment for goods, services, or mining, your profits may instead be taxed as income.

Understanding which category you fall into is the first step to knowing which tax rate applies.

Capital Gains Tax on cryptocurrency

If you buy crypto as a personal investment and later sell it for a profit, HMRC treats this as a capital gain. You only pay tax on the gain, which is the difference between what you paid for the crypto and what you received when you sold or exchanged it.

How to calculate your crypto gain

To calculate your gain, subtract the “allowable cost” from the disposal value.
Allowable costs include:

• The amount you paid for the crypto.

• Transaction fees and exchange costs.

• Any professional fees directly related to the purchase or sale.

For example, if you bought £2,000 of Ethereum and sold it for £3,200, your gain is £1,200. This gain is subject to Capital Gains Tax, but you can use your annual CGT allowance to offset part of it.

The Capital Gains Tax allowance and rates

Every UK individual has an annual CGT exemption, known as the Annual Exempt Amount. For the 2024/25 tax year, the allowance is £3,000. You only pay tax on gains above this threshold.

The rate you pay depends on your total taxable income:

• Basic rate taxpayers: 10% on crypto gains above the £3,000 allowance.

• Higher or additional rate taxpayers: 20% on crypto gains above the allowance.

For example, if your total taxable income (including crypto gains) keeps you within the basic rate band, you’ll pay 10% on your profits. If your total income pushes you into the higher rate band, you’ll pay 20%.

If you hold multiple crypto assets, you’ll need to calculate the gain for each disposal, then total them to determine your overall profit.

Income Tax on cryptocurrency profits

If HMRC views your crypto activity as trading rather than investing, your profits are taxed as income instead of capital gains. This typically applies to people who:

• Buy and sell crypto frequently with the intention of making short-term profits.

• Receive crypto as payment for goods or services.

• Earn crypto through mining, staking, or yield farming.

In these cases, your profits are treated like business income. You’ll need to include them in your Self Assessment or company accounts, depending on your setup.

Income Tax rates for individuals

For self-employed individuals or sole traders, the following Income Tax rates apply for the 2024/25 tax year:

• 20% on income up to £50,270.

• 40% on income between £50,271 and £125,140.

• 45% on income above £125,140.

You may also need to pay Class 2 and Class 4 National Insurance contributions if you are self-employed.

It’s important to note that mining and staking rewards are taxable at the point you receive them, based on their pound value at that time. If you later sell the crypto for a profit, you may also owe Capital Gains Tax on any further increase in value.

Corporation Tax on cryptocurrency profits

If your limited company holds or trades cryptocurrency, all profits and losses must be recorded in the company accounts. HMRC treats crypto transactions as part of normal trading activity or investment income, depending on the business’s purpose.

As of April 2025, the main rate of Corporation Tax is 25% for companies with profits over £250,000. Companies with profits below £50,000 pay a small profits rate of 19%. Businesses with profits between £50,000 and £250,000 pay a tapered rate.

All crypto profits made by a company are included in its taxable income. This includes gains from selling crypto, using it for payments, or receiving it as income.

Examples of how crypto tax rates work

Example 1: Individual investor
Amelia bought £5,000 worth of Bitcoin and sold it two years later for £9,000. Her gain is £4,000. After applying the £3,000 annual allowance, £1,000 is taxable. As a basic rate taxpayer, she pays 10%, so her tax bill is £100.

Example 2: Frequent trader
Ben trades crypto daily and treats it like a full-time business. His total trading profit for the year is £40,000. As a self-employed person, he pays Income Tax at 20% on the first £50,270 of total income, plus National Insurance contributions.

Example 3: Limited company
CryptoTech Ltd holds Bitcoin as part of its investment strategy. The company makes a £60,000 gain on disposal. It pays Corporation Tax at 25%, resulting in a £15,000 tax charge.

These examples show how the same type of profit can be taxed differently depending on your structure and activity level.

How losses affect your crypto tax

If you sell cryptocurrency at a loss, you can offset those losses against your gains. For individuals, these are capital losses and can be used to reduce your total taxable gain in the same year or carried forward to future years.

To claim a loss, you must report it to HMRC within four years of the end of the tax year. You can do this through your Self Assessment or by writing to HMRC.

For companies, crypto losses can also be offset against trading profits or carried forward under normal Corporation Tax rules.

Record keeping for crypto tax compliance

HMRC requires individuals and companies to keep detailed records of all crypto transactions. This includes:

• The date of each purchase or sale.

• The type and quantity of crypto.

• The pound value at the time of each transaction.

• Exchange or transaction fees.

• The purpose of each transaction (personal, business, or investment).

You must keep these records for at least five years after the end of the tax year. Using crypto accounting software such as Koinly, CoinTracker, or CryptoTax can make tracking and reporting much easier.

When to report your crypto tax

Individuals must report crypto gains on their Self Assessment tax return. The filing deadline for online returns is 31 January following the end of the tax year. For example, for gains made in the 2024/25 tax year (ending 5 April 2025), you must file and pay any tax owed by 31 January 2026.

Companies include crypto profits in their Corporation Tax return, normally due 12 months after the end of the accounting period, with payment due within 9 months and 1 day of the year end.

Avoiding common mistakes

Many crypto investors face issues with HMRC because they:

• Fail to record transactions properly.

• Assume crypto gains are tax-free.

• Confuse capital gains with income.

• Don’t declare overseas crypto assets.

To stay compliant, always record your transactions in pounds, keep exchange rate data, and separate personal and business holdings.

Professional advice for crypto taxation

The UK tax landscape for cryptocurrency is still developing, and HMRC regularly updates its guidance. Getting professional advice from an accountant experienced in digital assets can help ensure accuracy and reduce the risk of penalties.

An accountant can help you:

• Identify whether your activity falls under capital gains or income tax.

• Calculate gains and losses correctly.

• File accurate returns for both personal and corporate crypto income.

• Plan your crypto withdrawals to minimise tax exposure.

The bottom line

The tax rate on cryptocurrency profits in the UK depends on how you use your crypto. Most individuals pay 10% or 20% Capital Gains Tax, while traders and businesses may pay Income Tax at up to 45% or Corporation Tax at up to 25%.

Keeping accurate records, understanding HMRC’s classification rules, and seeking expert advice are the best ways to stay compliant and avoid unexpected tax bills. With the right approach, you can manage your crypto profits confidently while meeting all your UK tax obligations.