Crypto Taxes: The Basics

Tax is where many crypto users get caught out, not because the rules are secret, but because so many everyday actions count as taxable. Here’s how the basics work in the US and UK, plus a note on the UAE.

The big idea: crypto is property

Both the IRS and HMRC treat crypto as a type of property or asset, not currency. That means tax usually arises when you dispose of it, and the gain or loss is the difference between what you received and what it cost you.

What’s usually taxable

United States

• Capital gains: if you held the crypto for more than a year, gains are taxed at long-term rates; a year or less, at your ordinary income rates. Losses can offset gains.
• Income: crypto received as payment, mining or staking rewards is generally taxed as income at its fair market value when you receive it.
• Reporting: Form 1040 asks every filer whether they received, sold or exchanged digital assets. Disposals are reported on Form 8949.
• Broker forms: under recent rules, US brokers report crypto sales to the IRS on a new Form 1099-DA.

United Kingdom

• Capital Gains Tax applies when you dispose of crypto. You can make gains up to the annual exempt amount each tax year before paying tax; above that, rates depend on your income.
• Pooling rules set your cost: most tokens of the same type are pooled together, with special rules for tokens bought on the same day or within 30 days of a sale.
• Income Tax can apply to crypto received from employment, mining or some staking and airdrops.
• Reporting: gains and income go on your Self Assessment tax return, which has a dedicated section for cryptoassets.

UAE

The UAE doesn’t levy personal income tax or capital gains tax on individuals, so personal crypto gains are generally not taxed there. Businesses may fall under UAE corporate tax, and VAT rules for virtual assets have been updated. If you’re a resident of another country, or a citizen of the US, which taxes citizens on worldwide income, your home country’s rules may still apply.

Records to keep

• Date and time of every transaction
• Type of transaction and the assets involved
• Amount and value in your local currency at the time
• Fees paid
• Wallet addresses and exchange statements

Crypto tax software can import exchange data, but check it: transfers between your own wallets are often mislabelled as sales.

Before your first purchase, see our safe buying checklist, and for each country’s wider rules, is crypto legal in the UAE, UK and US?

Frequently asked questions

Do I pay tax if my crypto goes up but I don’t sell?

Generally no. In the US and UK, tax usually arises when you dispose of crypto, not when its value changes.

Are crypto losses useful?

Yes. In both countries, capital losses can usually offset gains, but you must report them correctly.

What if I haven’t reported crypto in past years?

Speak to a tax professional. Both the IRS and HMRC have ways to correct past returns, and acting voluntarily is usually better than waiting to be contacted.