Staking, Lending or Paid in Crypto: How HMRC Taxes It

Explains how Income Tax and National Insurance apply to cryptoassets received from mining, staking, lending, liquidity pools or an employer.

Contents of the manual's guidance on decentralised finance lending and staking, covering definitions and the Income Tax, Corporation Tax and chargeable gains treatment.

Contents of the manual's individuals section, covering which taxes apply, trading, Income Tax, Capital Gains Tax, valuation, stamp duties, Inheritance Tax and pension contributions.

Sets out which taxes apply to individuals holding cryptoassets: Capital Gains Tax on disposals, Income Tax and National Insurance on employment, mining or airdrop receipts, and Income Tax where a trade exists.

Explains HMRC's view that buying and selling exchange tokens amounts to a financial trade only in exceptional cases, and how Income Tax then takes priority over Capital Gains Tax.

Explains HMRC's view that cryptoassets received as employment income are readily convertible assets, so Income Tax and National Insurance apply to their value, with later disposals potentially giving Capital Gains Tax.

Covers how mining rewards are taxed for individuals, depending on whether mining amounts to a trade, with non-trading receipts taxed as miscellaneous income and later disposals possibly attracting Capital Gains Tax.

Explains HMRC's view of staking rewards received by individuals: whether the activity is a trade, otherwise miscellaneous income at sterling value on receipt, with Capital Gains Tax on later disposal.

Describes HMRC's treatment of airdropped tokens received personally, when Income Tax applies or may not apply, and the Capital Gains Tax position on later disposal.

Covers how an individual's trading losses may be offset against future profits or other income, and how losses on miscellaneous income may be carried forward to later years.

Describes how soft and hard forks work and HMRC's treatment of new tokens, including section 43 TCGA, a separate section 104 pool, cost apportionment and negligible value claims.

Describes HMRC's treatment of airdropped tokens for Capital Gains Tax, covering which section 104 pool they enter and why section 43 TCGA 1992 does not apply to them.

Explains how mining rewards are taxed for businesses and companies, contrasting casual mining with dedicated equipment bought for profit, and covering miscellaneous income, trading profits and later chargeable gains.

Explains HMRC's view of staking by businesses, covering when it amounts to a trade, when awards are taxed as miscellaneous income, and later Capital Gains Tax or Corporation Tax on chargeable gains.

Describes how airdropped tokens are treated for Corporation Tax on chargeable gains, including pool allocation and why section 43 TCGA does not apply where value is not derived from existing holdings.

Describes HMRC's view that exchange tokens given to employees are money's worth, so count as employment income subject to Income Tax and National Insurance contributions on their value.

Explains HMRC's view that exchange tokens generally are readily convertible assets, and how employers account for PAYE and Class 1 National Insurance when paying employees in them.

Explains HMRC's view that cryptoassets provided as readily convertible assets count as earnings for Class 1 National Insurance, which the employer accounts for through PAYE.

Covers PAYE and National Insurance where an employee is paid in exchange tokens that are not readily convertible assets, including Self Assessment declaration and employer Class 1A treatment as a benefit.

Covers the Income Tax and PAYE position where exchange tokens are provided to an employee by a third party under Part 7A ITEPA 2003, including the National Insurance consequences.

Introduces DeFi lending and borrowing of cryptoassets, and sets out HMRC's view that the lender's return is not interest for tax purposes because cryptoassets are not money.

Explains what the guidance means by DeFi lending and staking, describing the lender-borrower and liquidity-provider arrangements and noting these terms have no statutory meaning.

Describes the operating models for lending tokens or providing liquidity to DeFi platforms, how returns are paid, and why the platform's terms decide whether income or a chargeable gain arises.

Introduces the Income Tax treatment of returns from making DeFi loans, covering when activity is a trade, and when a return is income rather than a Capital Gains Tax matter.

Explains how the return on a DeFi loan or stake is taxed for Income Tax, depending on whether it is capital or revenue, including the miscellaneous income sweep-up provisions.

Sets out how the return on a DeFi loan or liquidity provision is charged to Income Tax as miscellaneous income at its sterling value, while repayment of principal is a capital matter.

Explains the factors HMRC uses to decide whether a DeFi lending or staking return is capital or revenue, such as whether it is agreed in advance and how it is paid.

Introduces the Corporation Tax treatment of returns from DeFi loans, covering when a company's activity is a trade, and when a return is a chargeable gain or miscellaneous income.

Explains how the return on a DeFi loan or stake is taxed for Corporation Tax, covering capital and revenue receipts, the miscellaneous income provisions and HMRC's view that no loan relationship arises.

Sets out how a company's return on a DeFi loan or liquidity provision is charged to Corporation Tax as miscellaneous income at sterling value, with principal repayment treated as capital.

States that the capital or revenue nature of a DeFi lending return is judged for Corporation Tax on the same considerations as for Income Tax, cross-referring to the Income Tax page.

Describes when making a DeFi loan or stake is a Capital Gains disposal because beneficial ownership passes, and how deferred consideration is valued under sections 48(1) and 37 TCGA 1992.

Explains the Capital Gains Tax consequences for borrowers and lenders when a DeFi loan is satisfied or a stake is withdrawn, including section 48 and section 22 TCGA 1992 treatment.

Works through an example of a token loan with a 5% return, showing how the full future repayment enters the Capital Gains computation while the return is taxed as income.

Works through an example of a token loan with no fixed end date, showing how section 48(1) TCGA brings the principal in and a right to future returns is valued.

Works through an example of a fixed-term token loan with a 5% return, showing how section 48 TCGA brings the repayment in and section 37 excludes the income element.

Works through an example of a lender whose loan of an ascertainable token quantity is satisfied after the tokens fell in value, showing income on the return and the capital loss.

Works through a Capital Gains example of an open-ended token loan with a percentage return, valuing the unascertainable right and treating extra tokens received on repayment as miscellaneous income.