Bitcoin and other cryptocurrencies have been back in the spotlight, after soaring on the back of Donald Trump’s election, then plummeting back down again before getting another boost when the president fleshed out some details about a proposed US crypto reserve.

The risk of dramatic ups and downs in the market are well known, and investors shouldn’t get into it without realising they could lose everything.

However, it’s not the only risk to be aware of – because even if you make money on crypto, you could be felled by tax.

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If you earned the crypto through work, or made it by mining it, then you could be in the frame for income tax. But if you bought it, the tax to worry about is capital gains tax (CGT).

You’ll need to work out what gain you’ve made. You can pool the cost of the coins you’re selling (assuming they are the same type of coins), considering what you paid for each of them, and then working out an average cost per coin.

Then you can work out the gain by subtracting that from the selling price. It means you need to be certain about what you paid for the coins and how much they have gained in value since then.

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You then need to either pay the capital gains tax immediately, using the real time service, or complete a self-assessment tax return at the end of the tax year.

You might not have to pay tax on all of the gain. If some of the coins you’re disposing of have lost value, you can offset the loss against any gains, but you need to report the loss to HMRC in order to do so.

You can also often subtract the transaction fees – which can be substantial when you sell crypto.

All this means you need to keep good records – including the date of disposal, the pooled costs before and after you disposed of them, the number of tokens you have left, and the value of them. You also need to hang onto bank statements and wallet addresses, because HMRC might ask to see any of these things if they carry out a check on your accounts.

Don’t assume your wallet will be the only record you need, because this isn’t necessarily stored for long. The exchange may not even exist when HMRC comes calling.

To some people this may sound like a real faff, and they may wonder whether they need to bother at all, so it’s worth knowing that HMRC works with the major exchanges and can access your customer information and transaction data.

The autumn budget last year also revealed HMRC would be keeping a closer eye on digital assets. Worldwide crypto activity from the start of 2026 will be reported automatically to the taxman – with the first reports hitting at the end of May 2027.