Cryptocurrency and digital assets have moved from fringe to mainstream for many people across Surrey, Kent and Sussex. But HMRC's position on how these assets are taxed is often misunderstood — and the consequences of getting it wrong can be significant.
HMRC's view: crypto is not currency
Despite the name, HMRC does not treat cryptocurrency as currency. It is treated as a capital asset — much like shares or property. This means that selling, swapping or spending crypto is a taxable event, and any gains may be subject to Capital Gains Tax.
What counts as a taxable event?
- Selling crypto for fiat currency (e.g. converting Bitcoin to pounds)
- Swapping one cryptocurrency for another
- Using crypto to pay for goods or services
- Receiving crypto as payment for work (treated as income, not a capital gain)
- Mining and staking rewards (also treated as income in most cases)
Simply buying crypto and holding it does not trigger a tax event — only disposal does.
Capital Gains Tax on crypto
CGT rates on crypto gains are 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers. The annual CGT exempt amount (currently £3,000) means gains below this threshold in a given year are not taxable. Losses can be offset against gains, reducing your overall liability.
The record-keeping challenge
HMRC expects records of every transaction — the date, the type of asset, the sterling value at acquisition and disposal, and the gain or loss on each trade. For active traders with thousands of transactions across multiple platforms, this can be complex. Dedicated crypto tax software can help.
What about DeFi, NFTs and staking?
HMRC has published guidance in these areas, though the rules are still evolving. As a general principle, any economic benefit derived from digital assets is likely to be taxable in some form. If you are active in these areas, specialist advice is strongly recommended.
Disclosing historic gains
HMRC has obtained data from UK crypto exchanges and is actively writing to individuals it believes have undeclared gains. If you have undeclared gains from previous years, HMRC's voluntary disclosure process is available — and far less costly than being investigated.
Talk to us about your situation
Our chartered accountants work with small businesses, landlords and contractors across Surrey, Kent and Sussex. Get in touch for a free initial consultation.
