Bitcoin Taxes UK: How Much Will You Pay? [UK 2024]

Trading Bitcoin leads to taxes in the UK, with investors having to report their profits and pay capital gains taxes.

The capital gains tax rate for transactions involving Bitcoin or other cryptocurrencies depends on whether you surpass the annual tax-free allowance and how much you earn in the year.

Let’s cover how Bitcoin taxes in the UK work, from how to determine gains/losses and income to generating the right tax reports.

Bitcoins & Taxation: An Overview

Capital gains tax 

Trading Bitcoin in the UK will lead to capital gains taxes, with the tax rate depending on how much you earn in the year. Converting Bitcoin to FIAT (e.g., GBP), stablecoins, or other cryptocurrencies will lead to capital gains taxes. 

In those cases, you need to determine the gain on each trade and pay the appropriate capital gains tax rate (based on your annual income), ranging from 10% to 20% (when you surpass the tax-free allowance).

Income Tax

Income taxes apply to Bitcoin and other cryptocurrencies on transactions when you receive some sort of income, like staking or mining. 

Bitcoin mining is taxed at an income level, where you need to determine the Fair Market Value (in GBP)  of the new coins you receive and then pay income taxes over that, according to your total income for the year.

Bitcoin Tax Rate in the UK: How Much Will You Pay?

Taxation of Bitcoin Transactions in the UK

The taxation of Bitcoin transactions in the UK depends on the nature of the transactions, which will determine if you pay capital gains taxes or income taxes. There is no specific crypto tax rate in the UK, but rather capital gains or income taxes to cryptocurrencies (like stocks). 

Here’s how the different types of Bitcoin transactions are taxed in the UK:

Bitcoin Trading Taxes UK

Bitcoin trading leads to capital gains taxes in the UK, with the tax rate depending on the total income you have for the year.

Taxable events in the UK include:

• Converting Bitcoin to FIAT (e.g., GBP);
• Trading Bitcoin for other cryptocurrencies;
• Trading Bitcoin for NFTs;
• Trading Bitcoin for DeFi tokens.

In all these cases, you need to determine the gain on each trade and then report it. Your gains can be taxed on a 10% or 20% capital gains tax rate, depending on your total income for the year. 

Bitcoin Mining Taxes UK

Earning crypto from activities like staking, airdrops, mining, hard forks, and others will result in income taxes in the UK.

For example, mining Bitcoin is taxed at an income level in the UK, with the tax rate depending on your total income for the year. 

You need to determine the Fair Market Value (in GBP) of the Bitcoin mining rewards you receive at the time you receive them. That will be the taxed income. 

Other Taxable Bitcoin Transactions

Other transactions around Bitcoin are taxable in the UK, including:

1. Gifting Bitcoin to someone;
2. Spending Bitcoin on purchases;
3. Receiving Bitcoin as a salary.

In the first and second cases, you need to determine the gain in the trade, and you’ll pay capital gains taxes over it. In the third case, you’ll pay income taxes over your Bitcoin salary.

Tax Reporting Requirements for Bitcoin Investors

What Happens If I Don’t Report Taxes on Bitcoin to HMRC’s?

Failure to report Bitcoin taxes in the UK can lead to penalties and fines over the amount of taxes due from your trading/earning activity. 

In the UK, you can pay much more than you need to if you do not accurately report your Bitcoin taxes by the tax deadline or face harsher consequences (e.g., jail time) depending on the magnitude and duration of the misreporting. 

If you have failed to report your Bitcoin taxes in the UK, you can file an amended self-assessment tax return to regularize your situation within 12 months of the deadline. Alternatively if it is later than 12 months from the filing deadline, you will need to file a disclosure with HMRC.

The tax deadline in the UK for online returns is January 31, 2025, for the 2024 crypto tax year.

Does the HMRC Know I Own Bitcoin?

Yes, tax authorities worldwide, including the HMRC, have the technological resources to identify customers’ holdings and the legal resources to summon crypto providers to disclose information.

As a UK taxpayer and crypto investor, you should follow the regulations in place, report your crypto, and be safe to avoid any legal/financial penalty.

Offset Taxes with Bitcoin Losses in the UK 

In the US, you can offset capital losses to your gains or carry forward them to offset future gains, but you have to register them. 

If you have losses from Bitcoin trading, you can register them as losses in your tax return and carry them forward to future years (when you plan to have capital gains). The capital gain tax-free allowance also reduces these gains on top of the Bitcoin losses you had.

You can only offset your gains with losses if you register those losses within the 4-year limit. You can do so in your self-assessment tax return or by writing to the HMRC to claim those losses within 4 years.

Bitcoin Gifts and Donations

Gifting Bitcoin in the UK is treated as a sale at the market value when you offer Bitcoin to someone who is not your spouse or civil partner. Gifting Bitcoin or other cryptocurrency to your spouse or civil partner is a tax-free trade.

When you offer Bitcoin to someone else (e.g., a friend), you need to determine the Fair Market Value (in GBP) of that amount of Bitcoin at that time, and those will be your sales proceeds. You’ll pay capital gains taxes over the gains between those sales proceeds and the FMV when you acquire that same amount of Bitcoin. 

If you receive Bitcoin as a gift and later sell it for a profit, you can deduct the amount of Bitcoin you received from the total sales proceeds, and you’ll be taxed over that gain.

Donating Bitcoin or other cryptocurrencies to a charity is a tax-free event in the UK. Moreover, you can get a deduction from your income taxes for the amount you donated.

​How to calculate Bitcoin taxes in the UK?

To calculate Bitcoin taxes in the UK, you need to follow these steps:

1. Import all of your crypto trades in the UK with the help of crypto tax software;
2. Determine the gains/losses from those taxable events (e.g., trading);
3. Determine the income (FMV in GBP) from income-related activities (e.g., airdrops);
4. Generate tax forms with the necessary information to file your self-assessment tax return.

Example: Bitcoin Tax UK

Here’s how to calculate Bitcoin taxes in the UK:

Example: Bitcoin Trading Tax UK

Let’s imagine that you bought 1 Bitcoin for GBP 35K in May 2022. In February 2024, you decided to sell that Bitcoin at GBP 69K.

Your capital gains for the trade would have been GBP 34K (GBP 69K – GBP 35K). Let’s imagine that you made GBP 70K/year. In this case, your capital gains tax rate was 20%.

Example: Bitcoin Income Tax UK

Let’s imagine that you started to mine Bitcoin. You received the first batch of Bitcoin (0.1BTC) in May 2022 when 1 Bitcoin was GBP 35K. At that time, you need to recognize GBP 3.5K in income. If you make GBP 70K/year, you’d be taxed at your marginal income tax rate (between 20-45%).

Bitcoin Taxes in other countries

Bitcoin is taxed in other countries, from trading to earning income from it. Here’s how Bitcoin taxes work in other countries, including:

Bitcoin Taxes Germany

Germany taxes the trading of Bitcoin for FIAT or other cryptocurrencies if it holds it for less than 12 months before selling. If you hold Bitcoin for over 12 months before selling, you can benefit from a tax-free rate. Discover more in our Germany crypto tax guide. 

Bitcoin Taxes Australia

Trading cryptocurrencies like Bitcoin for FIAT or other tokens, spending Bitcoin, and gifting Bitcoin is taxed at a capital gains level in Australia, with tax rates depending on your income tax bracket. Discover more about Bitcoin taxes in our Australia crypto tax guide. 

Bitcoin Taxes US

Trading Bitcoin for other cryptocurrencies, FIAT (USD), or other tokens is taxed at a capital gains level, with capital gains taxes going up to 35% (short-term gains). Earning Bitcoin from mining or other income-related activities is taxed at an income level in the US. Read more about US crypto taxes.

Conclusion about Bitcoin Taxes in the UK

Transactions with Bitcoin are taxed in the UK at a capital gains and income tax level, depending on the type of transaction. 

Capital gains in the UK for Bitcoin trading can be 0%, 10%, or 20%, while income taxes from transactions like earning Bitcoin (e.g., mining, salaries) can be taxed up to 45% (income tax brackets).

You need to determine gains and income and include those in the right tax forms before the tax deadline in the UK. CoinTracking can help you in each step, from importing trades to determining gains and generating tax reports.