CryptoTax UK · Guide
Crypto Trading vs Investing UK — Income Tax or CGT?
Most UK crypto investors pay Capital Gains Tax on profits. But if HMRC views your activity as a trade, you could pay Income Tax instead — with different rates and rules. This guide explains the distinction. Educational only — not tax advice.
Estimate my crypto tax →The default position — CGT
HMRC's position is that most individuals who buy and sell crypto are investors, not traders. As investors, they pay Capital Gains Tax on profits, can use the Annual Exempt Amount, and can offset capital losses.
When does crypto become a trade?
HMRC applies the 'Badges of Trade' — a set of indicators used to determine whether an activity constitutes a trade. Relevant factors include: very high frequency of transactions, short holding periods, using borrowed money to trade, and trading as your main source of income.
Consequences of being treated as a trader
If HMRC concludes you are carrying on a trade in crypto, your profits are taxable as income at your marginal Income Tax rate (up to 45%), not as capital gains (18% or 24%). You also owe Class 4 National Insurance on trading profits.
Frequently asked questions
Does trading crypto frequently automatically make me a trader for HMRC?
Not automatically — HMRC looks at the overall picture, not just frequency. However, very high-frequency activity with short holding periods and borrowed capital is more likely to attract scrutiny.
Can I choose whether I am taxed as a trader or investor?
No — HMRC determines the treatment based on the facts. You cannot elect to be taxed under CGT if HMRC considers your activity to be a trade.
More UK crypto-tax guides
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.