9th November 2025 > > HMRC & UK's crypto tax.

tl;dr

It’s all about tax, innit.

Market Snap

Market Wrap

The question that this week poses is the direction of the spot ETF flows, which have been largely negative of late. If that continues, BTC price action will be weak. I have a couple of cheeky bids at $95k and $89k, which I would be delighted to see filled.

Curious Cryptos’ meme corner

It’s good to get your priorities straight.

Curious Cryptos’ Commentary – HMRC

Yesterday’s brief commentary about HMRC resulted in an avalanche of questions on this topic.

I am not a tax advisor, nor a lawyer, but I do think I understand the basic mechanics of what is required of you for the calculation of any capital gains or losses on crypto investments, and the potential treatment of staking rewards as either income or capital.

Spoiler alert: on the narrow issue of staking rewards HMRC has got it completely wrong, and I am making that point forcefully to the powers that be. Don’t worry, I am on your side, and we will win.

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When thinking about how you are going to deal with HMRC, what you must always be cognisant of is the antagonistic attitude of the UK towards cryptos. This was turbo-charged when Rishi Sunak (remember him?) was at the Treasury and the chasm between his public announcements and action was as far apart as we have ever seen.

But it goes deeper than that.

You don’t need to be a supporter of the Conservative Party to understand that the politicians whose natural home was always the Liberal Democrats but who then used the Conservatives to get themselves into a position of power simply to satisfy their own egotistical desires, fundamentally broke the democratic contract between our parliament and us as UK citizens. Cameron, Osbourne, and Sunak, they are the prime examples of such despicable behaviour. Politics may never recover from their deceit, their deception, and their moral depravity.

It is no wonder that the level of distrust shown by the public towards lawmakers is now off the scale.

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HMRC naturally takes its cue from its political masters, and so its antagonism towards cryptos and crypto investors means that you need to be as careful and as precise as you possibly can in your tax return. I set out below what I believe is the absolute minimum you need to be doing to try to avoid the wrath of the pen-pushers.

I also urge you to take some real tax advice too.

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First up – you need to have very detailed documentation of every crypto investment you have ever made. Let’s start with the introduction of your fiat into the crypto world, most likely via Coinbase for UK investors.

At the minimum the documentation will include:

Date

Source of fiat funds

Destination of fiat funds

The notional of the crypto purchased

Any fees paid either in fiat or in the crypto you have bought

All this information should be detailed in a spreadsheet to aid CGT analysis (we will come to that later) with a saved PDF of the email you receive from the centralised currency exchange showing the trade details.

If you only ever use a centralised exchange to buy, store, and sell cryptos, then that information above should be enough to satisfy HMRC demands for proof of what you claim to have happened.

Let’s assume you use a Ledger Nano (preferably the Flex) to secure your cryptos. In this scenario you will also need this additional information:

Date of transfer from the exchange to your crypto wallet

The public key of your crypto wallet

Any charges incurred in the transfer

The net amount of cryptos transferred to your crypto wallet

All of this should be detailed in a spreadsheet to aid CGT analysis (we will come to that later) with the transaction id of the transfer, preferably with the appropriate blockchain explorer link. An example might be something like this:

https://polygonscan.com/tx/0x822f3a83b1208def73f3f41e769733e454254972d9d462894617f3b9bace1183

And whilst we are at it, any transfer of cryptos between wallets or between wallets and exchanges needs to be documented in the same way.

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Now, here is a rule that will surprise a lot of people, and which will cause much pain later down the road.

If you swap one crypto for another that is a taxable event for CGT even though no fiat was involved.

I know. Shocking. Disgraceful. Nonsensical. Arbitrary. And it’s bollocks.

But unfortunately, it is our tax law, and so even though it is an utterly stupid and deranged rule, it is the rule.

Here’s an example of it at work.

A meme investor deposits fiat to Coinbase, buys SOL on Coinbase, and then transfers that SOL to their Phantom wallet. All this activity is beautifully documented in line with my advice above.

Now that Phantom wallet uses SOL to buy and sell memecoins on https://raydium.io/swap.

Each one of those transactions requires this information:

Date

Notional of SOL swapped for the memecoin

Price of SOL at that point in time

Notional of memecoin bought

Gas fees paid in SOL

DeFi platform fees paid in SOL

The transaction id preferably with the relevant blockchain explorer link

Wow.

And that is for both sides of the trade – buying and selling (no-one is ever a long-term investor in any memecoin except for, obviously, DOGE).

If you are beginning to think that these HMRC rules seem to be designed to discourage cryptos investments (Sunak lied when he said “we are open for crypto business”) then you are spot on.

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Now that you find you are spending more time documenting trades than executing those trades, more time documenting trades than doing research, and more time documenting trades than thinking about how to position your portfolio, I have some even more terrifying news for you. Pulling all this information together to calculate your CGT and potential income tax liability is fraught with complications.

We will start with a simple rule that applies to stocks as much as cryptos.

When you partially sell an asset that you own, you are liable for CGT on the difference between the proceeds you receive and the cost you incurred. The proceeds are easy to calculate. The costs are defined as the weighted average cost of buying the asset including all direct expenses. If the concept of weighted average cost is difficult for you, then I can help you no more. Go and talk to your accountant and lawyer and get them to do the work.

Assuming you understand the concept of weighted average cost, then manipulating your spreadsheet to derive that number to compare with the proceeds of partially selling that asset is not difficult to envisage and simple to implement. If you are interested, I can send you a proforma spreadsheet, if you ask politely.

So, on the face of it, any reasonably competent and diligent investor who puts in the time and effort can relatively easily calculate their personal CGT liability.

If only.

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There are two key complicating factors.

The first is that the sale of any asset, partially or entirely, on the same day as purchase is netted off against that specific purchase, not the weighted average cost. It’s a simple enough concept but may cause a lot of fiddling within your spreadsheet when you are trying to calculate the weighted average cost excluding these specific examples, which may or may not include partial sales, or even over-sales.

Once you have grappled with that, and got it right, here is the real challenge, a little bomb left behind by Gordon Brown when he got annoyed with the ancient, tried, trusted, and highly productive practice of bed and breakfasting shares. On his watch, and at his command, any sale of an asset is to be disregarded for CGT purposes if that asset is bought back within the next thirty days.

You can imagine the havoc that this rule imposes in the calculation of CGT for any reasonably complex and active asset portfolio. It was a dumb decision made for stupid political purposes that makes the movement of capital far less efficient than it would otherwise be.

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Having got through all of that to correctly calculate your CGT liability to allow you to hand over an ever-increasing portion of your hard-earned gains to the government to allow it fritter away as it sees fit, the taxman then wants to know about your staking rewards.

Upfront, HMRC makes this extraordinary claim:

“It is likely that all staking rewards will be subject to income tax.”

Hahahahahaha.

I mean, are you serious? How can that possibly work in real life? Here is a textbook example why the pen-pushers are so wrong on this point. ARK is a PoS coin that pays out rewards every three to five days or so. This is a screenshot of my ARK wallet from two years ago showing the rewards accruing in my wallet:

Just from a practical point of view, how can anyone accurately document all receipts of staking rewards across a portfolio of PoS coins, including the market price at the time of receipt to declare as income? The bureaucrats are out of control.

HMRC also gives this guidance as to whether staking rewards should be income or capital for tax purposes:

“Indicators for income returns:

• Return was earned by providing a service to the DeFi platform

• The extent of the return was known at the time of the agreement (e.g. 4% APY)

• Return is paid by the DeFi platform to the liquidity provider

• Return is paid periodically

• The staking period is fixed or short-term

• 
  

Indicators for capital returns:

• Return is unknown and speculative at the time of the agreement

• Return is realized by disposing of a capital asset

• Return is realized from the growth in value of a capital asset by the liquidity provider

• Return is paid as a one-off payment

• The staking period is indefinite or long-term”

When you apply those criteria to any staking rewards, then the indicators for capital returns far outweigh those for income. HMRC contradicts itself – not for the first time – in its grasping greediness encouraged by the lack of moral fibre in all our leading politicians.

I have made my feelings plain to HMRC on this point. I will let you know how I get on.

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I have another potential conflict with HMRC which again is in discussion.

Let’s suppose you bought a coin and deposited it into a wallet. At some later date, you decide to move it from one wallet to another. That will involve gas fees. A strict interpretation of HMRC’s rules means that those gas fees are seen as a partial sale for an estimated amount of fiat which must therefore be included in your CGT calculation at the prevailing market price. The complexity this adds is extraordinary for any reasonably active portfolio.

I have told HMRC I am not going to do it that way. I have said I will treat gas fees as a reduction in notional at zero price. Treating gas fees my way makes for a largely immaterial change to my CGT liability, and I am hopeful that common sense will prevail. Again, I will let you know how I get on.

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So, that’s a long one today, with some scary information I know. Good luck dealing with the rapacious predators that stalk the corridors of HMRC.