Cryptocurrency Investing: Taxable Or Tax-Free?

Investing in cryptocurrency is a taxable event in the UK. Crypto assets are treated like shares and are subject to capital gains tax or income tax, depending on the nature of the transaction. For example, selling crypto for fiat currency or gifting it to someone other than your spouse are taxable events, whereas buying crypto with fiat currency or transferring it between your own wallets are not.

Capital gains from crypto are taxable

Crypto is treated similarly in the UK, where it is taxed like shares. This means that all cryptocurrency is taxable. The crypto tax you'll pay depends on the specific transactions you're making with your crypto. If you're seen to be making an income, you'll pay Income Tax. If you're seen to be making a capital gain, you'll pay Capital Gains Tax.

In the US, you'll pay short-term capital gains tax if you've owned your cryptocurrency for a year or less before selling. Short-term capital gains taxes are added to all other taxable income for the year, and you calculate your taxes on the entire amount. Short-term capital gains tax rates range from 10% to 37%.

Long-term capital gains tax applies if you sell cryptocurrency after owning it for more than a year. Long-term capital gains have their own system of tax rates. While these types of gains aren’t taxed as ordinary income, you still use your taxable income to determine the long-term capital gains bracket you’re in. Depending on your income and filing status, you’ll generally either pay 0%, 15% or 20% on your long-term gains.

In the UK, there is no specific short-term or long-term capital gains tax rate. All capital gains are taxed under the same rates. The amount of Capital Gains Tax you'll pay depends on how much you earn. For the 2025 tax year, you'll pay either 10% or 20% tax on any crypto gains, depending on what band you fall under.

If your income is less than £50,270 (total income), you'll pay 10% on crypto gains. If your income is more than £50,279 (total income), you'll pay 20% on crypto gains.

In the US, you only pay taxes on crypto when you sell it, whether for cash or for another cryptocurrency. So, if you haven't sold your crypto, you don't owe any taxes on it.

In the UK, you pay Capital Gains Tax when your gains from selling certain assets go over the tax-free allowance. You might also need to pay other taxes if you receive cryptoassets. You might need to pay Capital Gains Tax when you exchange your tokens for a different type of cryptoasset, use your tokens to pay for goods or services, or give away your tokens to another person (unless it’s a gift to your spouse or civil partner).

Income from crypto is taxable

UK

In the UK, crypto assets are treated like shares for tax purposes. This means that all cryptocurrency is taxable. HMRC is clear that crypto may be subject to both Capital Gains Tax and Income Tax depending on the specific transaction.

Crypto investors need to report gains on cryptocurrency on their annual self-assessment tax return or they can use HMRC’s real-time CGT reporting service to pay tax.

Malaysia

The Inland Revenue Board (LHDN) has clarified that cryptocurrency investors who actively trade their assets at the digital asset exchange (DAX) are required to declare their gains for their annual income tax.

US

The IRS treats all cryptocurrencies as capital assets, and that means you owe capital gains taxes when they’re sold at a gain. If you earn cryptocurrency from mining, receive it as a promotion or get it as payment for goods or services, it counts as regular taxable income.

Crypto mining is taxable

Crypto mining is indeed taxable. In the US, miners are taxed on their income from mining rewards and any capital gains from selling mined crypto. This means that there are two taxable events associated with crypto mining: ordinary income tax and capital gains tax.

Crypto mining income is taxed as ordinary income based on the fair market value of the coins on the day they are received. For example, if you mined 0.25 BTC on 15 March 2022, you will pay income tax based on Bitcoin's price on that date.

When you dispose of your mining rewards by selling, trading, or spending them, you will incur a capital gain or loss depending on how the price of your crypto has changed since you received it.

It is important to note that crypto mining taxes differ for hobbyists and businesses. Hobby miners are not allowed to deduct expenses such as electricity and hardware costs. On the other hand, if you run your mining operation as a business, you can fully deduct these expenses. Additionally, mining income for businesses will be added to trading profits and be subject to income tax.

To avoid penalties, it is crucial to report your crypto mining income and any capital gains or losses on your tax return. In the US, you may also be required to pay quarterly taxes on your mining income if certain conditions are met.

Crypto staking is taxable

Crypto Staking and Taxes

Staking is the process of pledging your cryptocurrency to a blockchain to help validate transactions. In return, stakers are rewarded with native tokens. Staking rewards are considered taxable income in many countries, including the US and the UK.

US Taxation of Crypto Staking

In the US, the IRS has clarified that staking rewards are taxable as gross income in the year they are received. This means that taxpayers must report the fair market value of staking rewards as income. Additionally, capital gains taxes apply when disposing of staking rewards. Taxpayers must also recognize income when they gain "dominion and control" over the rewards, which typically occurs upon receipt.

UK Taxation of Crypto Staking

The UK's HMRC treats staking rewards as income upon receipt. When staking rewards are disposed of, a capital gain or loss is incurred, depending on the change in the value of the crypto since it was originally received.

Australia and Canada Taxation of Crypto Staking

In Australia, staking rewards are taxed similarly to the US. However, the Canada Revenue Agency (CRA) has not released official guidance on crypto staking taxes. It is likely that staking rewards will be taxed as business income.

Calculating Crypto Staking Taxes

To calculate crypto staking taxes, individuals need to report the fair market value of their staking rewards upon receipt. This value serves as the cost basis for calculating capital gains or losses when the rewards are sold or disposed of. It is important to note that staking rewards are typically only taxed once, and individuals will not pay capital gains tax on income that has already been taxed.

Crypto trading is taxable

Crypto Trading Tax in the UK

Crypto assets are not considered money or currency by key financial institutions in the UK. Instead, they are treated like shares for tax purposes. This means that all cryptocurrency is taxable and subject to Capital Gains Tax and, in some cases, Income Tax.

When you dispose of a crypto asset, you may need to pay Capital Gains Tax. This includes selling crypto for fiat currency, trading crypto for another type, spending crypto on goods or services, and gifting crypto to someone other than your spouse or civil partner. The amount of tax you pay depends on your total income.

If your crypto activities are considered a business, any mining income will be added to your trading profits and be subject to Income Tax deductions. If your crypto mining is considered a hobby, any income must be declared under "miscellaneous income" on your tax return.

Crypto Trading Tax in the US

In the US, cryptocurrency is subject to income tax and capital gains tax. The IRS has been taking steps to ensure crypto investors pay their taxes, and you can be penalised for tax fraud.

You incur a taxable event when you earn or dispose of cryptocurrency. This includes selling, trading, or using cryptocurrency to buy goods and services. The amount of tax you pay depends on your personal income tax bracket and the length of time you held the crypto asset before disposal.

Cryptocurrency mining rewards are considered income based on the fair market value of the crypto at the time of receipt. If you are mining as a business, you can deduct expenses such as equipment and electricity.

Frequently asked questions