Avoiding common errors with tax and cryptoassets

Cryptoassets are becoming a more visible part of the tax system. Research carried out on behalf of the Financial Conduct Authority suggests that ownership of cryptoassets is becoming more common, and that the value of holdings is rising, increasing the likelihood that agents will have clients with tax to pay and/or reporting to do on cryptoasset transactions.  

Further, for 2024/25 onwards, capital gains and losses on cryptoassets must be reported separately on the self assessment (SA) tax return, and, from 2027, HMRC will begin to receive more information from cryptoasset services providers (CASP), helping it to ensure that taxpayers are complying with their tax obligations.  

If you find the thought of dealing with the tax implications of cryptoassets daunting, reviewing the common errors for direct taxes below – shared with ICAEW by HMRC – is a good place to start. 

Treating cryptoassets as a type of currency

Common error identified by HMRC: Taxpayers mistakenly treat cryptoassets as a type of currency, or money that has no tax consequences. 

Further details provided by ICAEW: As stated clearly in HMRC’s Cryptoassets Manual (CRYPTO10100), “HMRC does not consider cryptoassets to be currency or money”.  

This has a number of consequences, including that the provisions exempting gains on the following assets from capital gains tax (CGT) do not apply to gains on cryptoassets:  

• sterling (s21(1)(b)), Taxation of Capital Gains Act (TCGA) 1992; s269, TCGA 1992);  
• foreign currency bank accounts (s252, TCGA 1992); and 
• foreign currency for personal expenditure (s269, TCGA 1992).  

For companies, provisions that apply to currencies (CRYPTO41050) and the loan relationship rules (CRYPTO41100) do not apply to cryptocurrencies. 

Ignoring exchanges of cryptoassets

Common error: Taxpayers believe crypto-to-crypto transactions aren't disposals for CGT purposes.

Further details: As stated in HMRC’s guidance (CRYPTO22100) (emphasis added), “a ‘disposal’ [for CGT purposes] is a broad concept and includes:

• selling tokens for money
• exchanging tokens for a different type of token
• using tokens to pay for goods or services
• giving away tokens to another person (unless it’s a gift to their spouse or civil partner)”.

HMRC expanded on this topic in a letter that is being sent to wealthy taxpayers that may have underdeclared income and gains on cryptoasset transactions. In the letter, which is covered in further detail in a separate article, HMRC says that a taxpayer may have tax to pay where they exchange a cryptoasset for another cryptoasset, and gives the examples of exchanging bitcoin for Ether, or using bitcoin to buy a non-fungible token.

Omitting cryptoassets held on exchanges

Common error: Taxpayers believe any income and gains from cryptoassets aren't taxable as long as they're not withdrawn from the cryptoasset exchange. 

Further details: As can be seen from the examples given by HMRC for the common error of ignoring exchanges of cryptoassets, a disposal can occur for CGT purposes before or without the cryptoassets leaving the exchange. This is made clear in the letter referred to above where HMRC says that the examples are taxable transactions even if the taxpayer doesn’t “convert the gains back to fiat currency”. ‘Fiat currency’ means the official currency of a country, (eg, sterling). 

HMRC’s guidance also includes some useful examples of transactions in cryptoassets that do not constitute a disposal for CGT purposes, for example, where the individual moves tokens between wallets (CRYPTO22100).  

Failing to apply the share pooling rules

Common error: Individuals don't apply the CGT share pooling rules when calculating gains and losses on cryptoassets that are fungible, such as bitcoin.

Further details: Broadly, an asset that is the same as, and can’t be distinguished from another asset of the same class is a fungible asset. For the purpose of calculating capital gains and losses for individuals, disposals are matched with acquisitions in the following order:

• acquisitions made on the same day (s105, TCGA 1992);
• acquisitions made within 30 days of the disposal, on a first-in-first-out basis (s106A, TCGA 1992); and
• acquisitions held in the pool (s104, TCGA 1992).

If the taxpayer holds the same cryptocurrency across different platforms, any movements in the holdings must be reflected in the same asset pool.

HMRC guidance in applying the share matching rules to transactions in cryptocurrency can be found at CRYPTO22200, with detailed examples provided at CRYPTO22250 onwards. HMRC guidance on the rules applying to companies can be found at CRYPTO41350.

Missing the charge to income tax

Common error: Taxpayers think income events such as mining, staking, airdrops and employment-related payments in cryptoassets, are exempt from income tax.

Further details: At CRYPTO20050, HMRC says that transactions in cryptoassets will fall within the scope of CGT “in the vast majority of cases” for individuals.

However, HMRC also notes that individuals may need to pay income tax (and possibly national insurance contributions, depending on the circumstances) where they:

• are paid in cryptoassets by their employer (CRYPTO21100);
• receive cryptoassets from mining (CRYPTO21150), staking (CRYPTO21200) or airdrops (CRYPTO21250); or
• run a business which is carrying on a financial trade in cryptoassets (CRYPTO20250).

For HMRC’s guidance for companies, see CRYPTO40000.

Overlooking inheritance tax on cryptoassets

Common error: Taxpayers are unaware that cryptoassets are treated as assets for inheritance tax (IHT) purposes and may need to be valued and declared as part of an estate. 

Further details: HMRC explains that cryptoassets are property for the purposes of IHT at CRYPTO25000. In December 2025, ICAEW reported that HMRC is concerned that some agents may not fully understand the implications of this, leading to errors in, or the non-filing of IHT returns. The article explains that HMRC was in the process of writing to agents who had previously submitted IHT returns to strengthen agents’ knowledge of the IHT treatment of cryptoassets. 

Failing to keep adequate records

Common error: Taxpayers keep poor or incomplete records, especially for multiple exchanges, wallets and decentralised exchanges or protocols. 

Further details: The normal rules for keeping tax records, as summarised on GOV.UK, also apply for the purposes of cryptoassets.   

HMRC’s guidance on recordkeeping and cryptoassets (CRYPTO10400) states that: 

“Cryptoasset exchanges may only keep records of transactions for a short period, or the exchange may no longer be in existence when an individual completes a tax return. The onus is … on the individual to keep their own records for each cryptoasset transaction, and these must include: 

• the type of cryptoasset 
• date of the transaction
• if they were bought or sold 
• number of units involved 
• value of the transaction in pound sterling (as at the date of the transaction) 
• cumulative total of the investment units held 
• bank statements and wallet addresses, in case these are needed for an enquiry or review”. 

It must be noted that as exchanges may cease operation, or not maintain adequate records, reliance on exchanges is not recommended.  

Underestimating HMRC

Common error: Taxpayers assume that HMRC is not aware of their cryptoasset activities and so fail to declare, or do not take care in calculating their cryptoasset tax liabilities. 

Further details: In recent years, HMRC has used information received from a range of intelligence sources, including UK-based crypto exchanges, to make targeted compliance interventions. Going forward, HMRC will have more information at its disposal as, since 1 January 2026, the cryptoasset reporting framework (CARF) requires that cryptoasset services providers (CASP) in participating jurisdictions, which includes the UK, collect certain information on their customers and their cryptoasset transactions. From 2027, this information will be reported to the CASP’s domestic tax authority and exchanged automatically between participating jurisdictions. 

As noted above, HMRC added new boxes for cryptoasset gains and losses to the self assessment SA tax return for 2024/25 onwards (13.1 to 13.8 of the CGT supplementary pages), helping it to identify errors. Previously, gains and losses on transactions in cryptoassets were included in the boxes for other property, assets and gains (box 14 to 22).  

Further information

• TAXguide 01/2024: Taxation of cryptoassets for individuals
• TAXguide 02/2024: Taxation of cryptoassets for businesses
• Why the crypto asset reporting framework matters
• VAT and cryptoassets: international developments
• Taxing times: cryptoassets in the spotlight

Eligible ICAEW firms can access the title Cryptoasset taxation from the Bloomsbury Accounting and Tax Service. 

Author: ICAEW’s Tax Faculty. The original common errors of which this article was based on were provided by HMRC.