HMRC has published its first figures showing the scale of taxable gains made from cryptoassets.
HMRC has published its first figures showing the scale of taxable gains made from cryptoassets.(Image: AFP/Getty Images)
Crypto investors are being warned that simply exchanging one type of cryptocurrency for another could leave them with a tax bill – even if they have not withdrawn any money from their account.
HM Revenue and Customs (HMRC) treats exchanging one cryptoasset for another as a “disposal” for Capital Gains Tax (CGT) purposes, meaning investors may need to calculate whether they have made a taxable gain.
The warning comes after HMRC published its first official statistics on taxable cryptoasset gains, showing 17,600 people reported £1.38 billion in gains during the 2024/25 tax year.
Those investors reported disposing of cryptoassets with total proceeds of £13.8billion, while 240 people declared crypto gains exceeding £1million.
Thomas Drury, investment expert at The Investors Centre, said people may not realise a tax liability can arise when they exchange cryptocurrencies within an investment account.
He said: “The tax point is the exchange itself. When Bitcoin is exchanged for Ethereum, HMRC treats the Bitcoin as having been sold for its sterling market value at that moment.
“No pounds need to enter the investor’s bank account. Someone can therefore crystallise a gain, reinvest the entire value and still need cash from elsewhere to pay the tax.”
HMRC’s guidance on GOV.UK confirms that a disposal can include selling cryptoassets, exchanging them for a different type of cryptoasset, using them to pay for goods or services or giving them to another person, unless certain exemptions apply.
How exchanging crypto could result in a tax bill
For example, someone who bought Bitcoin for £10,000 and later exchanged it for £18,000 worth of Ethereum may have made an £8,000 gain for CGT purposes.
The calculation may be required even though the investor has not converted the investment into pounds and the Ethereum remains in their account.
HMRC’s crypto guidance specifically confirms that exchanging one type of token for another involves a disposal of one asset and an acquisition of the other.
However, simply moving the same cryptoassets between wallets controlled by the same person will not generally constitute a disposal because the beneficial ownership has not changed.
Mr Drury said: “The first check is whether the asset changed. Bitcoin leaving one wallet and the same Bitcoin arriving in another is generally a transfer. Bitcoin leaving and Ethereum, USDT or another token arriving is an exchange.”
Investors are being encouraged to keep records including the amount of crypto sent and received, transaction times, fees and sterling market values.
Capital Gains Tax allowance
People need to consider their total gains from chargeable assets during the tax year rather than looking at each cryptocurrency or investment account separately.
The annual Capital Gains Tax exempt amount is currently £3,000 for individuals.
Making a gain above £3,000 does not necessarily mean CGT will be due on the full amount. Capital losses and allowable costs can affect the eventual calculation, and the allowance applies across an individual’s chargeable gains for the tax year.
HMRC says people need to work out the gain or loss on crypto disposals and special rules can apply when tokens are bought and sold on the same day or within 30 days.
Mr Drury also warned investors against assuming the profit figure displayed by a cryptocurrency platform will necessarily match the figure required by HMRC.
He said: “HMRC’s calculation follows the investor across every wallet and platform.
“The practical test is whether the transaction export contains acquisition dates, quantities, sterling values and fees.”
Stablecoin tax rules changing from 2027
Investors exchanging cryptocurrencies for stablecoins also need to be aware of the current tax rules.
At present, exchanging a cryptoasset such as Bitcoin for a stablecoin can constitute a disposal for CGT purposes.
However, the UK Government announced in July that the treatment of certain stablecoins will change.
From April 6, 2027, disposals of eligible stablecoins will be exempt from Capital Gains Tax for individuals and trustees under planned legislation designed to treat them more like money for tax purposes.
That change does not mean the original cryptoasset being exchanged for an eligible stablecoin will automatically escape CGT. Investors will still need to consider the tax treatment of the asset they have disposed of.
HMRC to receive crypto data from 2027
The latest HMRC statistics follow the introduction of a dedicated section for reporting cryptoasset capital gains on Self Assessment tax returns.
HMRC said the 240 people who reported crypto gains exceeding £1m during 2024/25 accounted for £717m of the £1.38bn total reported gains.
New international reporting rules are also set to give tax authorities significantly more information about crypto holdings and transactions.
Cryptoasset service providers are being required to collect identifying information from customers under the international Cryptoasset Reporting Framework, with HMRC due to start receiving data from participating jurisdictions from 2027.
People who believe they have previously failed to pay tax due on cryptoassets can disclose unpaid liabilities to HMRC.
Mr Drury urged investors to retain their complete transaction histories, including trades, deposits, withdrawals, wallet addresses and fees, particularly before closing an account or moving to another provider.
He said: “Once an exchange removes an old reporting tool or restricts an account, reconstructing several years of token swaps becomes substantially harder.”
