NFT Taxes UK: Complete HMRC Info + Instructions [2024]

Non-Fungible Tokens (NFTs) are taxed in the UK at a capital gains and income tax level, with key differences you need to know about

NFT creation, trading, staking, earning, and many other transactions are taxed in the UK, but the type of tax and the rate will depend on the activity you conduct. Not sure?

Let’s cover all about NFTs, how NFT taxes work in the UK, how to report crypto and NFT taxes, and much more!

Are NFTs taxed like other Crypto Assets?

NFTs are treated as other assets, including cryptocurrencies, according to the HMRC. The type of activity you conduct will determine the type of tax involved with your NFT transactions. Let’s cover the main taxation type you can face with NFTs:

Are NFTs taxed like other Crypto Assets?

NFTs are treated as other assets, including cryptocurrencies, according to the HMRC. The type of activity you conduct will determine the type of tax involved with your NFT transactions. Let’s cover the main taxation type you can face with NFTs:

NFT Capital Gains Tax in the UK

Trading NFTs for any other asset – cryptocurrencies, NFTs, stablecoins, or FIAT – will lead to a taxable event, subject to capital gains taxes. 

In this case, you need to determine the gain on the transaction and then pay the appropriate capital gains tax rate, 10% or 20%, depending on your total yearly income. 

NFT Income Tax in the UK

Earning any type of income in the form of cryptocurrency or NFTs will be taxed at an income tax level in the UK.

In this case, you need to determine the Fair Market Value (in GBP) of the NFTs you received at the time you received them, and that FMV will be added to your total income. Your tax rate will depend on the income tax bracket you fall under. 

NFT Inheritance Tax in the UK

NFTs, as other assets, are included in someone’s estate and could be subject to inheritance tax in the UK at a 40% rate.

NFT Value Added Tax (VAT) in the UK

NFT transactions could be subject to Value Added Tax (VAT) in the UK under certain circumstances. In that case, there will be a 20% tax on the purchase.

How are NFTs taxed in the UK?

NFTs can be taxed at an income or capital gains tax level depending on the type of transaction. 

Trading Taxes for NFTs in the UK

NFT trading is taxed in the UK the same way as trading cryptocurrencies, subject to capital gains taxes. 

You need to determine the gain/loss on each trade involving NFTs and pay capital gains taxes over that amount, which can range from 0% to 20%, depending on your yearly income.

Buying NFTs

Buying an NFT with FIAT is not a taxable event. However, buying an NFT with another NFT or cryptocurrency is a taxable event subject to capital gains taxes. 

Selling NFTs

Selling NFTs for another cryptocurrency, FIAT, stablecoins, or another NFT is a taxable event in the UK, subject to capital gains taxes, with the tax rate being 0%, 10%, or 20%, depending on your total income for the year.

NFT Airdrops Taxes in the UK

Receiving NFTs from an airdrop campaign will lead to a taxable event in the UK, usually subject to income taxes.

If you receive NFTs from airdrops, you need to determine the Fair Market Value of the NFTs at the time you received them. That will be added to your total income for the year, and your tax rate will depend on the income tax bracket you fall under.

Staking NFTs

Receiving NFTs from staking will be taxed the same as receiving NFTs from airdrop. You’ll have to determine the FMV of the NFTs you received at that time and be subject to income taxes of up to 45%, depending on your income tax bracket.

Worthless NFTs: Tax treatment of losses in the UK 

Worthless NFTs can be used to offset your other crypto gains and reduce your crypto tax bill, but you have to realize your loss. If you have NFTs that plummeted in value, you have to realize that loss in the marketplace and then offset your gains.

You can also burn your NFT to realize that loss if you’re unable to sell it in the open market. Another alternative to realize the loss would be to give that worthless NFT to someone (it cannot be your spouse or civil partner).

Do You have to report NFTs on Your tax return?

Yes, you have to report gains/losses and income regarding your NFT activity in the UK in the right tax forms (e.g., self-assessment tax return). 

As a general rule, gains from NFT disposing (e.g., selling, trading, gifting, spending) are taxed at a capital gains tax rate. Earning NFTs from activities like airdrops, staking, yield farming, or gaming needs to be included in your total income and taxed at your income tax bracket rate.

Do you have to declare NFT holdings to HMRC?

You don’t have to report holdings of NFTs if you haven’t made any transactions that resulted in a taxable event. You only need to report gains/losses and income that derive from taxable events related to NFTs.

However, you should keep proper records of your holdings and transactions so it’s easy to calculate your NFT taxes when that need appears.

How to report NFTs on taxes?

Here’s how to report NFTs on taxes:

For Investors & hobby NFT creators

NFT investors will face capital gains taxes over their profits from investing in NFTs or cryptocurrencies. Investors have to determine the gains/losses from all the NFT trading and earning activities and report it on their self-assessment tax return. 

For professional NFT creators

Professional NFT creators operating a business will face business income tax instead of individual capital gains taxes on their NFT creations.

UK TAX Tips: How to reduce Your NFT taxes?

Here’s how to save on your NFT taxes:

Leverage losses for tax benefits

If you have losses from your NFT trading, you can offset your other gains with those losses and reduce your capital gain taxes that year. If you only have losses that year, you can register those NFT losses in your tax return and carry forward them to reduce gains in the future.

Take advantage of tax allowances

In the UK, you can have a GBP 3,000 capital gains tax-free allowance. If you have NFT gains that do not cross that threshold, you won’t pay any capital gains taxes. If you have an income of less than GBP 12,570 (total yearly income), you also won’t pay income taxes over your NFT income.

Maintain detailed documentation

In the UK, you need to keep proper records of your NFT transactions, including date of acquisition/sale, gains/losses, sales proceeds, cost basis, etc. The easiest way to do this is with crypto tax tools. 

Timing of transactions

If you have fluctuations in your income, you can time your NFT gains so they are realized in a year when you have less income to pay less capital gains taxes. 

Gifts to Spouse or Civil Partner

Gifting NFTs to your spouse or civil partner is a tax-free transaction, which can save taxes given that you double your capital gains tax-free allowance since now both people can claim that benefit.

How to easily calculate NFT taxes in the UK

To easily calculate your NFT taxes in the UK, you should use a crypto tax software to import your NFT trades, determine gains/losses and income, and generate the right tax forms.

When you trade NFTs for other assets, it’s difficult to track your gains/losses, while importing those trades into CoinTracking automatically determines the information you need. The same is true when determining the Fair Market Value of the NFTs you received from airdrops, gaming, or others.

After determining the income and gains, you have to generate the tax forms with your gains/losses and income and then file your crypto taxes on your self-assessment tax return.

NFT Tax in other countries

Germany

Trading NFTs works the same way as trading cryptocurrencies in Germany, with gains taxed at progression income tax rates, while if you hold them for over one year before selling, there are no taxes to be paid. Read more in our Germany crypto tax guide.

Australia

NFTs are taxed in Australia, but their taxation depends on your personal situation, including the nature of the activity. If you’re buying and selling NFTs, those are taxed at a capital gains level, but there are many other scenarios. Clarify everything in our Australia crypto tax guide.

US

NFTs are taxed in the US, with trading taxed at a capital gains level, while earning NFTs, from yield farming to creating and selling them, are taxed at an income tax level. Discover every detail in our US NFT tax guide.

Conclusion on NFT taxes in the UK

NFTs are taxed in the UK, subject to capital gains and income taxes depending on the nature of the activity. Tax rates can range from 10% to 20% on capital gains and up to 45% on income taxes. 

Tracking NFTs is the key way to be compliant as you need to keep accurate records and make it easy to know which of your trades classify as capital gains or income. 

Using crypto tax software like CoinTracking is the easiest way to import your NFTs, determine gains and income, and generate tax forms to file your UK NFT taxes.