When you dispose of cryptoasset exchange tokens (also known as cryptocurrency), you may need to pay Capital Gains Tax.
You pay Capital Gains Tax when your gains from selling certain assets go over the tax-free allowance.
You might need to pay other taxes if you receive cryptoassets.
When you may need to pay
You might need to pay Capital Gains Tax when you:
- sell your tokens
- exchange your tokens for a different type of cryptoasset
- use your tokens to pay for goods or services
- give away your tokens to another person (unless it’s a gift to your spouse or civil partner)
If you donate tokens to charity, you may need to pay Capital Gains Tax on them.
Working out if you need to pay
To check if you need to pay Capital Gains Tax, you need to work out your gain for each transaction you make. The way you work out your gain is different if you sell tokens within 30 days of buying them.
Your gain is normally the difference between what you paid for an asset and what you sold it for. In some situations, you may need to use the market value to work out your gain. For example, if you have an asset that has been transferred between ‘connected persons’.
You can find more information on when to use market value.
If you have paid Income Tax on any part of your cryptoasset token value then you do not need to pay Capital Gains Tax on that part. For example, you may have received the cryptoasset as part of earnings from your employment. You’ll still need to pay Capital Gains Tax on any gain you make after you’ve received them.
You can deduct certain allowable costs, including a proportion of the pooled cost of your tokens when working out your gain.
You can also use capital losses to reduce your gain, but you’ll need to report them to HMRC first.
If, after deductions, your total taxable gain is above the annual tax-free allowance, you must report and pay Capital Gains Tax.
What counts as an allowable cost
You can deduct certain allowable costs when working out your gain, including the cost of:
- transaction fees
- advertising for a buyer or seller
- drawing up a contract for the transaction
- making a valuation so you can work out your gain for that transaction
You can also deduct a proportion of the pooled cost of your tokens.
There are certain costs you cannot deduct. For example, costs:
- you’ve already deducted against profits for Income Tax
- of mining activities (like equipment or electricity)
Pool the cost of your tokens
You must group each type of token you own into pools and work out a pooled cost for each type.
You pool the cost of your tokens in the same way you pool costs for shares.
When you sell tokens from a pool, you can deduct an equivalent proportion of the pooled cost (along with any other allowable costs) to reduce your gain.
You’ll need to work out the pooled cost every time you buy or sell tokens.
When you buy tokens, add the amount you paid for them to the appropriate pool. When you sell them, deduct an equivalent proportion of the pooled cost from the pool.
You must keep records for each pool.
If you buy and sell tokens of the same type
Do not group tokens into pools if you buy them:
- on the same day that you sell tokens of the same type
- within 30 days of selling tokens of the same type
If you bought new tokens of the same type within 30 days of selling your old ones, the rules for working out the cost are the same as the rules for shares.
How to report and pay
If you need to report and pay Capital Gains Tax, you can either:
- complete a Self Assessment tax return at the end of the tax year
- use the Capital Gains Tax real time service to report it straight away
If you complete a tax return, you must complete it in pound sterling.
You can use HMRC’s Cryptoasset Disclosure Service, if you need to disclose unpaid tax from previous years,
Records you must keep
You must keep separate records for each transaction, including:
- type of tokens
- date you disposed of them
- number of tokens you’ve disposed of
- number of tokens you have left
- value of the tokens in pound sterling
- bank statements
- a record of the pooled costs before and after you disposed of them
You may also want to keep other records such as wallet addresses.
HMRC might ask to see your records if they carry out a compliance check.
Some cryptoasset exchanges can provide reports of your transactions. These reports can be essential for working out how much tax you owe. However, these reports are not tax calculations and will not keep track of your pooled costs.
It is important that you keep your own records of your transactions.
More information
You can read further guidance on how cryptoassets are taxed.
Watch a video about how cryptoassets are taxed for individuals.
Watch a video about how cryptoassets are taxed for individuals
