The taxation of crypto assets

Since their relatively recent introduction, there have been uncertainties over the taxation of crypto assets and blockchain technology.

Although some crypto-specific tax legislation is due to be introduced in April 2027, the taxation of crypto assets is generally covered by existing tax rules. HM Revenue & Customs (HMRC) has produced guidance to assist taxpayers but there are still areas of uncertainty, contention and practical problems, most notably when it comes to valuations, record-keeping and the situs of crypto assets.

Income tax

An individual will be subject to income tax on the profits made when disposing of crypto assets if they are classed as ‘trading’ in crypto assets. As with trading in shares, the threshold to be considered trading in crypto assets is relatively high; the operation must show substantial frequency in transactions, organisation and sophistication. This will ultimately be a question of fact and will depend on the specific circumstances of each case. In practice HMRC argues that relatively few individuals are trading in crypto assets.

Crypto asset returns received through either mining or staking (both methods of receiving new crypto assets by verifying transactions on the blockchain) will be taxed as income either as a trade or miscellaneous income depending on the circumstances. It is also possible that the value of crypto assets that have been airdropped to an individual may be subject to income tax, but only if the individual has done something in return for the airdrop, such as agreeing to promote a given crypto asset or project. Crypto assets airdropped with no attached expectations (or indeed completely out of the blue, as sometimes occurs) will not be subject to income tax.

Capital gains tax

Individuals not treated as trading will be subject to capital gains tax (CGT) on the profits they realise on the disposal of crypto assets, including cryptocurrencies and non-fungible tokens (NFTs). For the purposes of CGT, a disposal can mean the sale, gift, exchange or expenditure of a crypto asset. If any amount has been subject to income tax when obtained (for example, as a result of mining, or as employment income) then the amount previously taxed will form part of the base cost of the asset for these purposes.

Capital gains on fungible crypto assets of the same type need to be calculated by following ‘pooling’ rules under the normal matching rules more traditionally applied to shares. Different pools will be required for each crypto asset.

Several practical issues can arise for share pooling calculations:

• Due to the way pooling and matching works, all crypto asset transactions need to be included in the calculations. It is possible for transactions in a single cryptocurrency to be spread across multiple wallets. The pooling therefore needs to be constructed from multiple sets of records. Pooling does not apply to NFTs; they are, as the name suggests, non-fungible and are therefore unique assets.
• A high quantity of transactions can often be made every year. Due to the various rules in calculating pooling the CGT calculations can often become time consuming and costly. The use of a crypto calculator service may need to be considered.
• Transaction records are sometimes only recorded or retained in wallets for a limited time, and can even be lost entirely or become inaccessible in some cases of exchange failure. It is important that these are exported to a more permanent record to avoid key data being lost when relevant filing or potential HMRC enquiries arise.
• Much like shares, not all crypto assets have values listed publicly. If these are exchanged or subject to income tax on acquisition (eg mining) then the value of the asset will need to be calculated.

Crypto assets have had their own dedicated boxes on the CGT pages of the UK self-assessment tax return since the 2024-25 tax year. This should remind taxpayers to consider their crypto asset gains when completing their returns, and could also help HMRC to better target enquiries into crypto asset gains.

If you’ve made losses on crypto assets, held assets on a failed exchange or own crypto assets that may have become worthless, you may be interested in our article on claiming relief for crypto losses.

Stablecoins: proposed changes from April 2027

Stablecoins are crypto assets designed to maintain a relatively stable value, typically by being linked to a fiat currency such as the US dollar or sterling.

On 13 July 2026, the government published draft legislation proposing a separate tax regime for eligible stablecoins from 6 April 2027.

Broadly, the proposals would treat eligible stablecoins more like money for tax purposes. For individuals, disposals of eligible stablecoins would be exempt from CGT, while interest-like returns would be taxed as savings income.

At the time of writing, these provisions remain draft legislation and have not yet been enacted. Inheritance tax

Crypto assets are treated as property for inheritance tax (IHT) purposes and may need to be valued and reported as part of an estate.

Foreign currency

HMRC expect records, calculations and reporting to all be undertaken in sterling. Therefore, like other assets, it is possible for capital gains to arise when exchange rates move, even if the value of the asset expressed in a non-UK currency remains the same. Where value may be recorded in different crypto assets (usually Bitcoin) a double conversion will be required (Bitcoin value to US dollars, US dollars to sterling). This can add further complexity to the calculations.

Employment tax

It is becoming increasingly common (particularly for companies operating within the crypto space) for employees to be paid in cryptocurrencies as opposed to cash. If the cryptocurrency is a readily convertible asset (broadly one which is relatively easily exchanged into cash) it will be subject to PAYE – otherwise it will be taxable as a benefit in kind. This will also affect which type of National Insurance contributions are payable.

Situs

The situs of a crypto assets can be very important in determining the tax position for an internationally mobile individual. The HMRC manuals currently state that the situs of crypto assets will follow the residency of the owner, such that crypto assets held by a UK tax resident individual would be UK situs. In rarer cases where a crypto asset represents an underlying physical asset (eg tokenised ownership of a physical artwork), then the situs of the crypto asset may mirror that of the underlying physical asset.

HMRC’s position on situs has been subject to debate as, while it is practically the most straightforward approach, it does also create some inconsistencies – the same cryptocurrency owned by two separate individuals living in different countries would have a different situs for UK tax purposes. This is at odds with other assets such as cash or shares, where the residency of the owner is largely irrelevant.

Clarity on this point is likely to eventually be determined by case law or the introduction of specific legislation. Many UK tax resident individuals have chosen to file tax returns on the basis that their crypto assets are non-UK situs. It will be important to make the relevant disclosures to reduce the risk of penalties should HMRC successfully challenge this position.

For more information on the income tax, capital gains tax and inheritance tax rules that replaced the previous regimes for non-UK domiciled individuals from 6 April 2025, see our articles Non-dom tax changes: the FIG regime, CGT and income tax and Inheritance tax reforms for UK non-doms.

Taxation of DeFi

The government published draft legislation on 13 July 2026 covering the taxation of decentralised finance (DeFi) transactions. These can take many forms but typically involve the lending of crypto assets or temporarily swapping one crypto asset for another.

The draft legislation, which is intended to take effect from 6 April 2027, introduces specific CGT rules for three different types of DeFi transactions:

• Single crypto asset lending arrangements. For arrangements such as lending a token and receiving an equivalent token back after a certain period of time, the draft legislation provides  ‘no gain no loss’ treatment where crypto assets of the same type are ultimately returned. This broadly defers any gain or loss until there is an economic disposal of the crypto asset..
• Single crypto asset borrowing arrangements. Where an individual borrows crypto assets from a lender (perhaps with the provision of other crypto assets as collateral), the provision of collateral would be disregarded for CGT purposes. However, if the individual disposes of the borrowed tokens, tokens of the same type subsequently acquired for the purpose of repaying the loan would be treated as if they were the same tokens as those originally borrowed. This could lead to a chargeable disposal.
• Automated market making arrangements. These cover arrangements such as those where an individual introduces crypto assets into a liquidity pool, exchanging crypto assets of one kind for liquidity tokens of another with rights to unconditionally exchange these back at some rate in the future. The initial exchange of tokens for rights would be treated as a ‘no gain no loss’ disposal. The tax treatment on the subsequent exchange of rights for tokens would be driven by the number of tokens they receive back; receiving more tokens than originally exchanged could lead to a chargeable gain, and the converse could lead to an allowable loss. If an equal number of tokens is received back, this would be a ‘no gain no loss’ disposal.

As these changes are yet to be legislated, taxpayers cannot currently rely on these proposed tax treatments.

HMRC’s increasing access to crypto asset data

From 1 January 2026, many crypto asset service providers are required to collect information about their customers and report details of crypto asset transactions under the Cryptoasset Reporting Framework (CARF). The information collected includes details of users, their tax residence and their crypto asset transactions. HMRC will receive information reported by UK crypto asset service providers and will also receive data from overseas tax authorities operating equivalent reporting regimes.

This increased transparency is intended to help HMRC identify individuals who may not have reported their crypto asset income or gains correctly. As a result, taxpayers should expect HMRC to have significantly greater visibility of crypto asset transactions than in previous years.

HMRC has already carried out targeted compliance activity in relation to crypto assets and the additional information available through the Cryptoasset Reporting Framework is likely to increase its ability to identify errors and omissions in tax returns.

How Saffery can support you with crypto asset tax reporting

The taxation of crypto assets continues to evolve, with taxpayers often needing to apply broader tax rules to increasingly complex transactions.

Our crypto and digital assets team advises clients from investors to NFT project creators and metaverse developers on the tax treatment of digital assets and associated reporting obligations.

We can help with:

• Identifying income tax, capital gains tax and inheritance tax implications of crypto asset holdings and transactions
• Preparing and reviewing crypto asset capital gains tax calculations
• Reconstructing transaction histories across multiple wallets, exchanges and platforms
• Assessing whether historic gains, losses and other transactions have been reported correctly
• Making voluntary disclosures to HMRC where errors or omissions are identified
• Considering the UK tax implications for internationally mobile individuals, including situs issues

If you have any specific queries relating to crypto assets, please speak to your usual Saffery contact or use the Get in Touch form.