UK Crypto Mining Tax Guide 2025

HMRC Treatment of Mining

HMRC's CRYPTO manual (CRYPTO22000-23000) provides guidance:

• Mining rewards = taxable income when received
• Classified as trading income or miscellaneous income
• Income value = fair market value in GBP
• Cost basis for CGT = income value

Trading vs Miscellaneous Income

Trading Income (Most Miners)

If mining is organized, regular, and profit-seeking:

• Report on SA103 (Self Employment)
• Taxed at 20-45% (income tax rates)
• Class 2 NI: £3.45/week if profit >£6,725
• Class 4 NI: 6% on profits £12,570-£50,270, then 2% above
• Can deduct allowable expenses
• Can offset losses against other income

Miscellaneous Income (Casual Miners)

If mining is small-scale or casual:

• Report on SA102 (Employment) or SA100 (main return)
• Taxed at 20-45% (income tax rates)
• No National Insurance
• £1,000 trading allowance (tax-free if under)
• Can deduct expenses OR claim £1,000 allowance (not both)

How HMRC Determines Trading vs Miscellaneous

HMRC considers "badges of trade":

• Profit-seeking motive: Clear intention to make profit?
• Frequency and regularity: Daily mining = likely trading
• Organization: Dedicated equipment, space, records?
• Scale: Significant investment in equipment?
• Expertise: Technical knowledge and skill?

Example: Trading vs Miscellaneous

Trading:

• Purchased 20 ASIC miners for £40,000
• Dedicated warehouse space
• Mining 24/7 with business plan
• Registered as self-employed

Miscellaneous:

• Gaming PC mining when idle
• Annual income £800
• No dedicated equipment or space
• Casual hobby interest

Income Calculation

When is Income Recognized?

When you receive coins:

• Solo mining: When you successfully mine a block
• Pool mining: When pool credits your account

Fair Market Value

FMV = GBP value at time of receipt:

• Use exchange rate from UK exchange (Coinbase, Kraken, etc.)
• Be consistent with valuation method
• Document exchange rate source

Example: Income Calculation

• 15 March 2024: Receive 0.05 BTC from pool
• BTC price: £50,000
• Mining income: 0.05 × £50,000 = £2,500
• Cost basis for CGT: £2,500

National Insurance (Trading Only)

Class 2 NI

£3.45 per week (2024/25) if profits >£6,725:

• Voluntary if profits <£6,725
• Counts toward state pension
• Paid via Self Assessment

Class 4 NI

Example: National Insurance

• Mining profit: £30,000
• Class 2: £3.45 × 52 weeks = £179
• Class 4: (£30,000 - £12,570) × 6% = £1,046
• Total NI: £1,225
• Plus: Income tax on £30,000

Allowable Expenses (Trading)

Common Deductions

1. Electricity: Power consumption (business portion)
2. Equipment: Mining hardware (capital allowances)
3. Rent: Dedicated mining space
4. Internet: Business portion
5. Cooling and ventilation: HVAC costs
6. Repairs and maintenance: Equipment repairs
7. Pool fees: Mining pool charges
8. Software: Mining software subscriptions
9. Professional fees: Accountant, tax adviser

Capital Allowances (Equipment)

Mining equipment = plant and machinery:

• Annual Investment Allowance (AIA): 100% deduction on first £1 million
• Writing Down Allowance: 18% per year on remaining value
• Claim in year of purchase or spread over time

Example: Capital Allowances

• Buy £30,000 in ASIC miners
• Claim AIA: Deduct entire £30,000 in year 1
• Alternative: 18% WDA over multiple years

£1,000 Trading Allowance (Miscellaneous Only)

If income <£1,000:

• Tax-free (don't need to report)

If income >£1,000:

• Claim £1,000 allowance (no expense tracking needed), OR
• Deduct actual expenses (if higher than £1,000)

Selling Mined Crypto

Capital Gains Tax

When you sell mined coins:

• Capital gain/loss = proceeds - cost basis
• Cost basis = income value when mined
• Report on SA108 (Capital Gains Summary)
• Section 104 pooling applies
• £3,000 annual exemption (2024/25)

Example: Selling Mined Coins

• March 2024: Mine 0.1 BTC (income: £5,000)
• December 2024: Sell for £7,000
• Capital gain: £7,000 - £5,000 = £2,000
• Under £3,000 exemption: No CGT

Full Tax Example

• When mined (March): £5,000 income tax + NI (if trading)
• When sold (December): £2,000 capital gain
• Total economic value: £7,000
• First £5,000 taxed as income, next £2,000 as capital gain

Tax Rates

Income Tax (Mining Income)

Plus National Insurance if trading (up to 8% total)

Capital Gains Tax (Selling Mined Coins)

Annual Exemption: £3,000 (2024/25)

How to Report

Self Assessment Tax Return

Trading miners:

1. SA103: Self Employment pages (mining income and expenses)
2. SA108: Capital Gains (if selling mined coins)
3. National Insurance calculated automatically

Miscellaneous miners:

1. SA100: Main return, "Other taxable income"
2. SA108: Capital Gains (if selling)
3. Claim £1,000 allowance or deduct expenses

Registering for Self Assessment

If new to mining:

• Register as self-employed by 5 October after tax year you started
• Obtain Unique Taxpayer Reference (UTR)

Deadlines

• Online: 31 January following tax year
• Paper: 31 October following tax year
• 2023/24 tax year (6 Apr 2023 - 5 Apr 2024) due 31 Jan 2025

Record Keeping

Keep records for 5 years after Self Assessment deadline:

• Mining pool statements (dates, amounts, GBP values)
• Wallet addresses and transaction hashes
• Equipment purchase invoices
• Electricity bills (with business use calculation)
• Repair and maintenance receipts
• Pool fees and software subscriptions
• Daily/monthly mining logs

Tools for Mining Tax

• Koinly - UK mining income tracking, HMRC reports
• CryptoTaxCalculator - Section 104 pooling
• TokenTax - Mining categorization

Common Mistakes

1. Not reporting mining income: HMRC considers it taxable when received
2. Claiming expenses without trading status: Miscellaneous income has limited deductions
3. Not registering as self-employed: Required if trading
4. Forgetting National Insurance: Trading adds 6-8% on top of income tax
5. Using £0 cost basis for CGT: Cost basis = income value when mined
6. Missing £1,000 trading allowance: Casual miners can claim tax-free threshold
7. Not tracking Section 104 pool: Required for CGT on sales

FAQs

Is crypto mining taxed as income in the UK?

Yes. Mining rewards are income (trading or miscellaneous) at fair market value when received.

Do I pay tax when I mine or when I sell?

Both. Income tax when mined, then capital gains tax when sold (on any appreciation).

Is mining trading income or miscellaneous income?

Depends on scale and organization. Most serious miners with dedicated equipment = trading. Casual miners = miscellaneous.

Can I deduct mining expenses?

Trading: Yes, deduct electricity, equipment (capital allowances), and other expenses. Miscellaneous: Claim £1,000 allowance OR deduct expenses (whichever is higher).

Do I pay National Insurance on mining?

Trading: Yes, Class 2 and Class 4 NI. Miscellaneous: No NI.

Can I use the £1,000 trading allowance?

Only if mining is miscellaneous income (not trading). If income <£1,000, it's tax-free.

What if I mine at a loss?

Trading: Can offset losses against other income. Miscellaneous: Cannot offset losses.

Do I need to report if I haven't sold?

Yes. Mining income is taxable when received, even if you don't sell.