CryptoTax UK · Guide
How are crypto airdrops taxed in the UK?
Receiving free tokens sounds like a windfall with no tax implications — but HMRC disagrees. Depending on whether the airdrop was received in return for a service, it may be taxable as income the moment you receive it. This guide explains the rules clearly. Educational only — not tax advice.
Calculate my airdrop tax →The two types of airdrop HMRC recognises
HMRC draws a clear line between two kinds of airdrop. The first is a 'free' airdrop — tokens distributed with no requirement to do anything in return, such as a project distributing tokens to existing wallet holders. The second is a 'service' airdrop — tokens received in return for promoting a project, completing tasks, providing liquidity, or any other activity. These are treated very differently for tax.
Free airdrops: typically no Income Tax on receipt
If you received tokens without doing anything in return — purely because you held a wallet address or owned another token — HMRC generally treats this as not subject to Income Tax on receipt. However, the tokens still acquire a cost basis at their market value on the date received, which matters when you later dispose of them. At that point, Capital Gains Tax applies on any gain above your cost basis.
Service airdrops: Income Tax applies immediately
If you received tokens in return for any kind of activity — retweeting, completing a form, providing a service, participating in a protocol — HMRC treats the airdrop as miscellaneous income. You pay Income Tax on the GBP value of the tokens at the time of receipt. The tokens then have a cost basis equal to the income amount declared — relevant when you later dispose of them.
Hard forks: treated like free airdrops
When a blockchain splits and you receive new tokens as a result of a hard fork (such as receiving Bitcoin Cash when Bitcoin forked), HMRC treats this similarly to a free airdrop. No Income Tax on receipt, but the tokens acquire a nil cost basis in your Section 104 pool. This means the entire proceeds are a gain when you later sell — unlike a service airdrop which establishes a cost basis.
Keeping records of airdrops
For every airdrop you receive, record: the date received, the name and quantity of tokens, the GBP market value on the date of receipt, and whether any service was provided in return. Many airdropped tokens have volatile prices — capture the value promptly as it can change dramatically within hours.
Frequently asked questions
Do I pay tax on airdrops I never sold?
For service airdrops, yes — Income Tax is due on receipt regardless of whether you sell. For free airdrops, no Income Tax is due on receipt, but you must record the value for future CGT purposes when you eventually dispose of them.
What if the airdropped tokens are now worthless?
If you paid Income Tax on a service airdrop and the tokens are now worthless, you can claim a capital loss when you dispose of them (including a negligible value claim if they have become genuinely worthless). This loss can offset gains elsewhere.
How do I value airdropped tokens with no market price?
Some airdropped tokens have no immediate market price. HMRC accepts a nil value in this case, meaning no Income Tax is due on receipt. Once a market price is established, that becomes the cost basis going forward.
Are Play-to-Earn and GameFi rewards treated the same as airdrops?
Generally yes — crypto rewards received for in-game activity or Play-to-Earn are typically treated as miscellaneous income (like service airdrops), with Income Tax due on receipt based on GBP value. Subsequent disposal is then subject to CGT.
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Calculate my airdrop tax →Educational guidance only. CryptoTax UK is not a regulated tax adviser and the information above does not constitute tax, legal or financial advice. Always confirm your specific position with HMRC or a qualified accountant before filing.