HMRC has issued a new warning to anyone trading or cashing in crypto, reminding people that they may need to pay tax if their profits exceed £3,000. The alert was shared in a post on X, where the tax authority urged investors to check their obligations before they get caught out.
HMRC wrote: “If your crypto profits have taken off, you may need to pay tax. Crypto gains above £3,000 count towards your taxable allowance. Check if you need to pay tax on cryptoasset profits and make sure your tax status isn’t lost in space.”
The £3,000 figure refers to the Capital Gains Tax (CGT) annual allowance. Anyone whose gains from certain assets, including crypto, exceed that amount in a tax year must report them to HMRC and pay CGT.
HMRC’s official guidance says people may need to pay CGT if they make a gain when they “dispose” of cryptoasset tokens.
According to the rules, disposal includes selling them, exchanging them for another cryptocurrency, using them to pay for goods or services, or giving them away unless it is to a spouse, civil partner or charity.
The guidance says: “You need to work out your total gains from disposing of certain assets, including cryptoassets. If your total gain for the tax year (6 April to 5 April) is above the Capital Gains Tax tax-free allowance, then you must report the gain to HMRC and pay Capital Gains Tax.”
People may also need to pay other taxes if they receive cryptoassets through work, mining or rewards.
HMRC explains that investors must calculate their gain for each transaction. In most cases, the gain is the difference between the amount paid for the tokens and the amount they were sold for.
In certain situations, such as transfers between connected persons, the market value must be used instead.
The guidance also says: “You can deduct allowable costs and use capital losses on other assets to reduce your gain, but you’ll need to report them to us first.”
Allowable costs include transaction fees, advertising, contract fees, valuations and a proportion of pooled costs. Costs of mining activities, such as equipment or electricity, cannot be deducted.
Crypto investors must also follow the UK’s “pooling” rules, which group each type of token into a single cost pool.
HMRC explains: “Each time you buy or receive tokens, add the amount you paid for them to the appropriate pool. Each time you dispose of tokens, deduct an equivalent proportion of the pooled costs and other allowable costs.”
Tokens bought on the same day as they are sold, or within 30 days of selling, follow the same rules used for shares.
HMRC stresses that investors must keep detailed records for every transaction, including token type, dates, quantities, values, bank statements and updated pooled costs.
While crypto exchanges may provide reports, “they’re not tax calculations” and do not track pooled costs, meaning investors must keep their own records.
Anyone who exceeds the tax-free allowance must report their gains either through a Self Assessment return or the Capital Gains Tax real-time service.
HMRC says returns for the 2024–2025 tax year onwards will include a specific cryptoasset section, which must be completed in pound sterling.