How is crypto taxed? The basics

Is crypto taxed like money or like property?

Tax offices generally do not treat crypto as currency. The US Internal Revenue Service (IRS) says plainly that digital assets are treated as property, and its definition covers coins like bitcoin, stablecoins and NFTs. In the UK, HM Revenue & Customs (HMRC) applies Capital Gains Tax when you dispose of cryptoassets.

That one decision drives everything else. Because crypto is an asset, the question is not "did I spend money?" but "did I dispose of an asset worth more, or less, than I paid?"

Which crypto transactions are taxable?

The table compares how the IRS and HMRC describe common situations, as of October 2026.

Swaps are the trap for beginners. Trading one token for another feels like staying "in crypto", but both tax offices treat it as disposing of the first token. If you earn rewards from staking or receive an airdrop, the value when you receive it is generally income, and it becomes your starting cost for any later sale.

How do you calculate a gain or loss?

The basic formula is the same everywhere: what you received minus what the asset cost you. The IRS calls the cost your basis and says it includes fees, commissions and other acquisition costs. When you sell only part of a holding, you need a method to decide which cost applies.

The US lets you identify specific units if your records show when each was bought and for how much. The UK uses pooling: you add every purchase of the same token to one pool and take an average cost when you sell — except that tokens bought on the same day as a sale, or within 30 days after it, are matched first.

Our crypto profit calculator helps with the arithmetic, but it does not apply tax rules for you.

Why does the holding period matter in the US?

The IRS splits gains by how long you held the asset. Held for one year or less, a gain or loss is short-term; held for more than one year, it is long-term. The holding period starts the day after you acquire the asset. Because every gain is classified this way, the date on each purchase record matters as much as the price.

Losses count too. The IRS describes a sale below your basis as a capital loss, short-term or long-term by the same test, and it is reported alongside your gains. How losses can be used depends on your country and situation.

What do exchanges report to tax authorities?

Reporting is shifting from "self-declared" to "third-party reported":

1. United States. Brokers report digital asset sales on Form 1099-DA: gross proceeds for transactions from 1 January 2025, and cost basis from 1 January 2026. Every Form 1040 also asks a yes-or-no question about digital asset activity.

2. European Union. Under DAC8, Council Directive (EU) 2023/2226, crypto service providers collect data on reportable transactions from 1 January 2026; member states first exchange it between 1 January and 30 September 2027.

3. United Kingdom. Under the OECD Crypto-Asset Reporting Framework, UK providers ask users for their name, date of birth, address and tax reference. HMRC says failing to provide accurate details can bring a penalty of up to £300.

The practical result: tax offices increasingly see the same transaction history you do. Keeping your own records is still your job.

What mistakes do beginners make with crypto taxes?

• Ignoring crypto-to-crypto swaps. In the US and UK they are disposals.
• Forgetting fees in the cost. The IRS includes acquisition fees in basis; HMRC allows transaction fees as costs.
• Not recording income when received. Staking and mining rewards are income at their value on the day you get them.
• Relying only on exchange statements. Transfers between platforms break the chain of cost records. HMRC expects records for each transaction, with values in pounds.
• Copying another country's rules. Thresholds, allowances and rates differ widely; check your own tax authority.