What are the tax implications of buying crypto?

What are the tax implications of buying crypto?

HMRC is becoming increasingly active with regards to crypto with over 65,000 nudge letters having been sent out to suspected crypto investors in 2025. In 2024, 27,700 letters were sent out. 

The letters are being sent in advance of the new reporting obligations for cryptoasset service providers which come into force from 1 January 2026 with the first deadline for filing of reports being 31 May 2027 covering all of the 2026 activity.

What is becoming apparent is that many investors do not understand the UK tax effects of investing in crypto.

If you’re buying crypto in the UK, it’s wise to be aware of how HMRC treats cryptoassets for tax purposes. While buying alone typically doesn’t trigger a tax liability, how you receive, use, swap, or dispose of crypto can have tax implications — and it’s easy to trigger a taxable event without realising.

1. Buying & holding: no immediate tax liability

When you purchase crypto – for example, Bitcoin or another token – simply buying and holding the asset does not create a tax charge. HMRC’s guidance confirms that you don’t pay tax when you buy tokens. 

However, this is where the caveats start: tax can be triggered when you use or convert those cryptoassets later.

2. Taxable ‘disposals’ & capital gains tax (CGT)

When you dispose of a cryptoasset, you may incur capital gains tax (CGT). HMRC treats disposal fairly broadly; a disposal can include:

• selling crypto for sterling;
• exchanging one crypto for another;
• spending crypto on goods or services; and
• gifting crypto to someone.

When you dispose, if the total taxable gains in a tax year exceed your CGT allowance, you will owe tax on the excess. At present the CGT amount is £3000, but the tax rate you pay depends on your overall income and whether the gain pushes you into a higher tax band. 

3. Income tax – when crypto is received as income

If you receive cryptoassets in a way that amounts to income (rather than simply buying and holding), such as through employment then income tax (and possibly National Insurance) may apply. 

Note that if you later dispose of those tokens, you may also face CGT on any subsequent gain above the value when you first received them. 

The tax effects, however, can be substantial where, for instance, there are significant profits made in one year and significant losses the next.  If you are considered to be an investor, you’ll be taxed under the capital gains regime and you won’t be able to carry back any losses to the previous year.  However, if you are considered to be actively trading, within limits, losses can be carried back.

With the crypto markets being provenly volatile, this distinction can and does have an effect on investors.

4. Record-keeping & reporting requirements

Because crypto is treated like any other taxable asset, maintaining accurate records is important. HMRC’s guidance states you must keep records of token type, date received/acquired, disposal, number of units, value in GBP at each relevant time, wallet addresses, fees, etc. 

From a reporting perspective:

• If you have to complete a self assessment tax return (for example, because you have taxable gains above the allowance or crypto income) you must declare those gains/income. 
• As mentioned above, starting 2026, there are enhanced rules under the Crypto‑asset Reporting Framework (CARF) requiring crypto service providers to report user transaction data to HMRC. 

5. Practical tips & pitfalls

• Buying alone is safe — so long as you just buy and hold. The tax triggers come from disposal or income receipt.
• Swapping tokens is a disposal. Many people assume that trading one crypto for another is tax-free, but HMRC treats it as a disposal event. 
• Using crypto to pay for goods/services counts as disposal. So even if you never convert to sterling it may still create a CGT event. 
• Keep details of fees, costs, and valuations. Especially if you use multiple wallets/exchanges or transfer between them.
• Seek help if you receive crypto through employment. The income tax rules are less intuitive.
• Be prepared for HMRC scrutiny. The tax authority has signalled they are ramping up ‘oversight’ of crypto holdings and therefore a swift and successful resolution to any HMRC enquiry is the maintenance of detailed records.

6. Summary

Buying crypto assets in the UK does not immediately trigger tax. But once you dispose of them (via sale, swap, spending, gifting) or receive them as income, tax obligations may arise.

For disposals: you will need to consider CGT (subject to annual allowance, currently £3,000).

For income: income tax and National Insurance may apply at the point of receipt. Careful record‐keeping, awareness of what constitutes a disposal, and timely reporting to HMRC are key.

If you are unsure as to whether you have correctly reported your Crypto, please get in touch, the team here at Kennedys Accounting will be pleased to assist you.