Crypto Tax 2025/26: Why the £3,000 CGT Allowance Changes Everything for UK Investors
- MAZ
- Jul 7
- 13 min read
The Audio Summary of the Key Points of the Article:
Navigating the £3,000 CGT Allowance – What It Means for Your Crypto Gains
Why Has the CGT Allowance Dropped to £3,000?
So, let’s kick things off with the big news: the Capital Gains Tax (CGT) allowance for the 2025/26 tax year is a mere £3,000. If you’re a crypto investor, this is a game-changer. Back in 2022/23, you could make £12,300 in gains tax-free. By 2023/24, it was halved to £6,000, and now, for 2025/26, it’s down to £3,000. This shrinking allowance, confirmed in the Autumn Budget 2024, means more of your crypto profits are taxable, even if you’re just dabbling in Bitcoin or Ethereum.
The UK government’s rationale? To boost tax revenue amid economic pressures, but for you, it’s a signal to get smarter with your tax planning. HMRC treats cryptocurrencies as assets, not currency, so every “disposal” (selling, swapping, spending, or gifting crypto, except to your spouse) triggers a potential CGT event. If your total gains exceed £3,000 in a tax year (6 April 2025 to 5 April 2026), you’ll owe tax on the excess.
How Does the £3,000 Allowance Work for Crypto?
Now, let’s break it down. The £3,000 CGT allowance is your tax-free threshold for all capital gains in a tax year, not just crypto. So, if you’ve sold stocks, a second home, or even a rare Pokémon card, those gains eat into the same allowance. For crypto, a “disposal” includes selling for GBP, trading Bitcoin for Ethereum, or using crypto to buy a coffee. Your gain is the difference between the acquisition cost (what you paid, plus fees) and the disposal value (what you got, in GBP). If your total gains stay under £3,000, you’re in the clear. Cross that line, and you’re taxed at 18% (basic rate taxpayers, with income up to £50,270) or 24% (higher/additional rate taxpayers, income over £50,270) on the excess, as per the updated rates post-30 October 2024.
Here’s a quick example: Imagine Aisling, a nurse from Bristol, buys 1 Bitcoin for £20,000 in 2023 and sells it for £25,000 in July 2025. Her gain is £5,000. After deducting the £3,000 allowance, she’s taxed on £2,000. If her income keeps her in the basic rate band, she owes £360 (18% of £2,000). But if she’s a higher-rate taxpayer, it’s £480 (24%). Simple, right? Well, not always—crypto portfolios often involve dozens of transactions, and HMRC’s “share pooling” rules complicate things.
What Are HMRC’s Share Pooling Rules?
Be careful! HMRC’s share pooling rules can trip you up. When you buy the same crypto (e.g., Bitcoin) at different times, HMRC treats it as a single “pool” with an averaged cost basis. You calculate gains using this average cost when you dispose of any portion. Plus, there are matching rules: the “same-day rule” (matching buys and sells on the same day) and the “30-day rule” (matching sales to buys within 30 days) take priority to prevent “bed and breakfasting” (selling and rebuying to lock in gains). Let’s say Idris, a London freelancer, buys 2 ETH for £2,000 each in June 2025 and another 1 ETH for £3,000 in July. His pool has 3 ETH with a total cost of £7,000, so an average of £2,333 per ETH. If he sells 1 ETH for £4,000 in August, his gain is £4,000 - £2,333 = £1,667. If his total gains for the year are under £3,000, no tax. But with multiple trades, tracking this manually is a nightmare—crypto tax software like Koinly or Recap can save your sanity.
Table 1: CGT Rates and Allowances for 2025/26
Tax Band | Income Range | CGT Rate | CGT Allowance |
Basic Rate | £12,571 - £50,270 | 18% | £3,000 |
Higher Rate | £50,271 - £125,140 | 24% | £3,000 |
Additional Rate | Over £125,140 | 24% | £3,000 |
Source: GOV.UK, updated October 2024
Why Does the Split Tax Year Matter?
Now, here’s a curveball: the 2024/25 tax year is split due to the Autumn Budget 2024, which hiked CGT rates from 10% to 18% (basic rate) and 20% to 24% (higher rate) starting 30 October 2024. For 2025/26, these higher rates apply all year. If you disposed of crypto before 30 October 2024, you’d use the old rates for those transactions. For example, if Nia, a Manchester-based teacher, sold crypto in September 2024 for a £5,000 gain, she’d apply the £3,000 allowance and pay 10% on the remaining £2,000 (£200). A similar sale in July 2025 would cost her £360 at 18%. This split means you need to track disposals carefully, separating pre- and post-October 2024 gains. Use HMRC’s real-time CGT reporting service for disposals or file via Self Assessment by 31 January 2027 for the 2025/26 tax year.
How Does Income Tax Interact with CGT?
None of us is a tax expert, but here’s where it gets tricky: crypto isn’t just about CGT. If you earn crypto through mining, staking, or payments for services, it’s treated as income, taxed at 20% (basic), 40% (higher), or 45% (additional) after the £12,570 personal allowance. The catch? If you later sell that crypto, you may also owe CGT on any gain above the value taxed as income. Take Elowen, a Cardiff graphic designer, who earns 0.5 ETH (£1,000) for freelance work in 2025. She pays income tax on £1,000. If she sells that ETH for £1,500 later, her CGT gain is £500, assuming no other costs. If her total gains are under £3,000, she’s fine; otherwise, she’s taxed on the excess. This double-taxation risk means you need to track the cost basis meticulously.
Practical Strategies and Edge Cases for UK Crypto Investors in 2025/26
How Can You Maximise the £3,000 CGT Allowance?
Now, let’s get practical. With the Capital Gains Tax (CGT) allowance slashed to £3,000 for the 2025/26 tax year, every crypto investor needs a game plan to keep their tax bill low. The good news? There are legal ways to make the most of this allowance. First, consider crystallising gains strategically. If your crypto portfolio’s gains are hovering near £3,000, you could sell just enough to stay within the tax-free limit.
For instance, take Rhys, a Sheffield-based IT consultant, who holds 0.2 Bitcoin bought at £15,000, now worth £18,000. By selling half (0.1 BTC) for £9,000, his gain is £1,500 (£9,000 - £7,500). He stays under the £3,000 allowance, pays no CGT, and keeps the rest for future growth. Timing disposals across tax years can also spread gains, keeping each year’s total below £3,000.
Another tactic is spousal transfers. You can transfer crypto to your spouse or civil partner tax-free, effectively doubling your household’s CGT allowance to £6,000. Say Priya and her husband Arjun, both Bristol residents, each have £4,000 in crypto gains. By transferring half of Priya’s holdings to Arjun before selling, each uses their £3,000 allowance, potentially saving £360 (18% of £2,000) if they’re basic rate taxpayers. Just ensure transfers are genuine—HMRC requires proof of ownership change, like wallet transaction records.
Can You Offset Crypto Losses?
Be careful! Not every crypto trade is a winner, and losses can be your friend at tax time. If you sell crypto at a loss, you can deduct it from your gains before applying the £3,000 allowance. Let’s say Eleri, a Swansea freelancer, sold 1 ETH for £2,000 that she bought for £3,000, incurring a £1,000 loss. Later, she sells Bitcoin for a £5,000 gain. Her net gain is £4,000 (£5,000 - £1,000). After the £3,000 allowance, she’s taxed on £1,000—potentially £180 (18%) instead of £360 without the loss. You must report losses to HMRC within four years to claim them, ideally via Self Assessment. Even better, unused losses can carry forward indefinitely, so keep records of every dip.
Table 2: Example of Loss Offsetting with £3,000 CGT Allowance
Transaction | Gain/Loss | Running Total | Taxable After Allowance |
Sold 1 ETH (Loss) | -£1,000 | -£1,000 | - |
Sold 0.1 BTC (Gain) | +£5,000 | £4,000 | £1,000 (£4,000 - £3,000) |
Tax (18% Basic Rate) | - | - | £180 |
Source: Author’s calculation based on HMRC CGT rules, 2025/26
What About DeFi, NFTs, and Airdrops?
Now, here’s where things get murky. Decentralised Finance (DeFi), Non-Fungible Tokens (NFTs), and airdrops are increasingly popular, but HMRC’s guidance is still catching up. For DeFi (e.g., staking, yield farming), rewards are often treated as income at their GBP value when received, then subject to CGT on any later sale. Imagine Owain, a Leeds student, stakes 10 ADA (£5 each) and earns 2 ADA (£10) in rewards. He pays income tax on £10. If he sells all 12 ADA for £84 (£7 each), his CGT gain is £84 - (£50 + £10) = £24, assuming no fees. If his total gains are under £3,000, no CGT applies, but tracking these micro-transactions is crucial.
NFTs are trickier. Selling an NFT you created (e.g., digital art) is often income, not a capital gain, especially for business owners. If you’re a casual investor buying and selling NFTs, it’s CGT, but HMRC may deem frequent trading as a business, taxing profits as income instead. Airdrops? Free tokens are income at receipt, with CGT on future disposals. For example, if Cerys, a Brighton artist, gets a £500 airdrop and sells it for £700, she pays income tax on £500 and CGT on £200, subject to the £3,000 allowance. Always document receipt dates and values—HMRC’s blockchain tracking tools are getting sharper.
How Does HMRC Track Your Crypto Transactions?
Now, it shouldn’t surprise you that HMRC is watching. Since 2019, they’ve used blockchain analytics tools like Chainalysis to trace crypto transactions. Exchanges like Coinbase and Binance share data under international agreements, so don’t assume your trades are invisible. If you’re audited, HMRC can request wallet addresses, transaction histories, and even bank statements. Non-compliance risks penalties—20% of unpaid tax for careless errors, up to 100% for deliberate evasion. For 2025/26, you must report crypto gains via Self Assessment (due 31 January 2027) or real-time CGT reporting within 60 days of a disposal. Use software to generate HMRC-compliant reports, and keep records for at least six years.
Step-by-Step Guide: Calculating Your Crypto Tax for 2025/26
So, the question is: how do you actually calculate your crypto tax? Here’s a practical guide to stay compliant:
Gather Transaction Data: Collect all buy, sell, swap, and reward transactions from wallets and exchanges. Include dates, GBP values (use spot rates from CoinMarketCap or exchanges), and fees.
Apply Matching Rules: Use HMRC’s same-day and 30-day rules to match disposals to acquisitions. Then calculate the pool’s average cost basis for remaining assets.
Calculate Gains/Losses: For each disposal, subtract the cost basis (including fees) from the disposal value. Sum all gains and losses for the tax year.
Apply the £3,000 Allowance: Deduct losses from gains, then subtract the £3,000 allowance from the net gain to find the taxable amount.
Determine Your Tax Rate: Check your income tax band (via www.gov.uk/check-income-tax-current-year). Apply 18% (basic) or 24% (higher/additional) to taxable gains.
Report to HMRC: File via Self Assessment by 31 January 2027 or real-time CGT reporting within 60 days. Pay any tax due by the deadline.
Keep Records: Store transaction logs, receipts, and calculations for six years to cover audits.
Can Business Owners Deduct Crypto Expenses?
If you’re a business owner, listen up. Crypto used in your trade (e.g., accepting Bitcoin payments) can complicate things. If your business holds crypto as an investment, it’s subject to CGT with the £3,000 allowance. But if you’re trading crypto as a business activity, profits are taxed as income, and you can deduct expenses like electricity for mining or transaction fees. For example, Dafydd, a Cardiff café owner, accepts ETH for coffee and later sells it. If HMRC deems this trading, his profits are income, not CGT, with no £3,000 allowance but deductible costs. Consult a crypto tax advisor to clarify your status—HMRC’s “badges of trade” test determines whether you’re investing or trading.
What If You’re a High-Net-Worth Investor?
Now consider this: if you’re sitting on massive crypto gains, the £3,000 allowance feels like pocket change. High-net-worth investors face the 24% CGT rate and often complex portfolios. One strategy is charitable donations. Donating crypto to a UK charity is CGT-free, and you may claim Gift Aid if you’re a taxpayer. Another option is trusts or pension contributions, though these require specialist advice. For example, Sioned, a London financier, donates 1 BTC (worth £50,000) to a charity, avoiding CGT on her £30,000 gain and potentially claiming tax relief. Always verify charity status and get professional advice for high-stakes moves.
Key Takeaways for UK Crypto Investors in 2025/26
Summary of the Most Important Points
Now, let’s wrap things up with the essential points you need to know about crypto tax and the £3,000 CGT allowance for the 2025/26 tax year. These are the critical insights to help you stay compliant and save money where possible, distilled into a clear, actionable list.
The CGT allowance is £3,000 for 2025/26: You can make up to £3,000 in capital gains (from crypto or other assets) tax-free, but any excess is taxed at 18% (basic rate) or 24% (higher/additional rate) after the Autumn Budget 2024 rate hike.
Crypto disposals trigger CGT: Selling, swapping, spending, or gifting crypto (except to a spouse) counts as a disposal, with gains calculated as disposal value minus acquisition cost, including fees.
HMRC’s share pooling rules complicate calculations: Use the same-day and 30-day rules, then average the cost basis for your crypto pool to compute gains accurately.
Income tax applies to certain crypto activities: Mining, staking, airdrops, or crypto payments for services are taxed as income (20%, 40%, or 45%), with CGT on later disposals.
Offset losses to reduce your tax bill: Report crypto losses to HMRC within four years to deduct them from gains, lowering your taxable amount before applying the £3,000 allowance.
Spousal transfers double your allowance: Transferring crypto to your spouse or civil partner is tax-free, allowing you to use both £3,000 allowances for a household total of £6,000.
DeFi, NFTs, and airdrops have unique tax rules: DeFi rewards and airdrops are income at receipt, NFTs may be income or CGT depending on your activity, and all require meticulous record-keeping.
HMRC tracks crypto aggressively: Blockchain analytics and exchange data-sharing mean you must report gains via Self Assessment (by 31 January 2027) or real-time CGT reporting (within 60 days).
Business owners face different rules: If trading crypto as a business, profits are taxed as income with deductible expenses, not CGT, so clarify your status with a tax advisor.
Strategic planning saves tax: Crystallise gains under £3,000, spread disposals across tax years, donate to charities, or explore trusts to optimise your tax position, especially for high-net-worth investors.
FAQs
Q1: What is the deadline for paying CGT on crypto disposals in the UK?
A1: Capital Gains Tax on crypto disposals must be paid either through real-time CGT reporting within 60 days of the disposal or via Self Assessment by 31 January following the tax year.
Q2: Can UK crypto investors claim tax relief for crypto donations to charity?
A2: Donating crypto to a UK charity is exempt from CGT, and taxpayers may claim Gift Aid relief if eligible, reducing their overall tax liability.
Q3: How does HMRC determine if crypto trading is a business activity?
A3: HMRC uses the “badges of trade” test, considering factors like transaction frequency, profit motive, and organisation to decide if crypto trading is taxed as income rather than CGT.
Q4: Are crypto-to-crypto trades taxable in the UK?
A4: Yes, swapping one cryptocurrency for another is considered a disposal, triggering a CGT event based on the GBP value of the crypto received at the time of the trade.
Q5: Can UK investors carry forward unused CGT allowance to future years?
A5: No, the £3,000 CGT allowance cannot be carried forward; it resets each tax year and must be used within that year.
Q6: What happens if a UK investor fails to report crypto gains to HMRC?
A6: Failing to report crypto gains can lead to penalties of 20% of unpaid tax for careless errors or up to 100% for deliberate evasion, plus interest on late payments.
Q7: Are crypto losses deductible against other income types?
A7: Crypto losses can only offset capital gains, not other income like salaries, but unused losses can be carried forward indefinitely.
Q8: How does HMRC value crypto for tax purposes?
A8: HMRC uses the GBP spot price at the time of the transaction, typically sourced from reputable exchanges or price aggregators like CoinMarketCap.
Q9: Can UK investors use crypto tax software to file with HMRC?
A9: Yes, HMRC accepts reports from crypto tax software like Koinly or Recap, provided they comply with HMRC’s calculation rules and include all required transaction details.
Q10: Are crypto gifts to family members (not spouses) taxable in the UK?
A10: Gifting crypto to anyone other than a spouse or civil partner is a disposal, triggering CGT based on the market value of the crypto at the time of the gift.
Q11: Do UK crypto investors need to report transactions below the £3,000 allowance?
A11: If total gains are below £3,000 and no tax is due, reporting is not mandatory, but keeping records is recommended for potential HMRC audits.
Q12: How does the £3,000 CGT allowance affect joint crypto investments?
A12: Each individual in a joint investment gets their own £3,000 allowance, provided ownership is clearly split and documented for HMRC.
Q13: Are crypto mining costs deductible for UK taxpayers?
A13: Mining costs, like electricity or hardware, are deductible if mining is treated as a business activity, but not for hobbyist miners taxed under CGT.
Q14: Can UK investors avoid CGT by holding crypto in a trust?
A14: Transferring crypto to a trust may defer or reduce CGT, but complex rules apply, and professional tax advice is essential to ensure compliance.
Q15: What records must UK crypto investors keep for tax purposes?
A15: Investors must keep records of all transactions, including dates, GBP values, fees, wallet addresses, and exchange confirmations, for at least six years.
Q16: Are crypto airdrops always taxed as income in the UK?
A16: Airdrops are taxed as income at their GBP value when received, unless they’re unsolicited and have no value, in which case only CGT applies on disposal.
Q17: Can UK investors claim tax relief for crypto stolen or lost?
A17: Stolen or lost crypto may qualify as a capital loss if evidence like police reports or wallet records is provided, but HMRC approval is needed.
Q18: How does the £3,000 CGT allowance apply to crypto held in ISAs?
A18: Crypto cannot currently be held in tax-free ISAs in the UK, so the £3,000 allowance applies to all crypto gains outside such accounts.
Q19: Are crypto transactions in foreign exchanges taxable in the UK?
A19: Yes, UK residents must report and pay CGT on crypto gains from foreign exchanges, converting values to GBP using HMRC-approved rates.
Q20: Can UK crypto investors appeal HMRC’s tax assessments?
A20: Investors can appeal HMRC assessments within 30 days, providing evidence like transaction records to dispute errors in tax calculations.
About the Author
Mr. Maz Zaheer, FCA, AFA, MAAT, MBA, is the CEO and Chief Accountant of My Tax Accountant and Total Tax Accountants—two of the UK’s leading tax advisory firms. With over 14 years of hands-on experience in UK taxation, Maz is a seasoned expert in advising individuals, SMEs, and corporations on complex tax matters. A Fellow Chartered Accountant and a prolific tax writer, he is widely respected for simplifying intricate tax concepts through his popular articles. His professional insights empower UK taxpayers to navigate their financial obligations with clarity and confidence.
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