I’ve made thousands through Bitcoin — do I have to pay tax on it?

The price of Bitcoin has fluctuated throughout the years, but for a number of early investors, the risk ended up being well worth it.

This week’s Money Problem reader, Andy, is among those who got in at the right time, making a pretty penny as a result.

The 25-year-old from Truro invested a few hundred pounds into the cryptocurrency a decade ago, and more recently opted to be paid in Bitcoin by a work client.

But with his balance now totalling well over £7,000 he’s realised these returns may be taxable, so reached out to Metro consumer champion, Sarah Davidson, for guidance.

The question…

About 10 years ago I set up an account to buy £300 worth of Bitcoin and since then I’ve bought another £500. I also did quite a bit of website design between July and November in 2024 and got paid in Bitcoin.

It’s gone up and down in value a lot over the years but I’ve done really well out of it overall.

This time last year, I withdrew £7,000 to put down as a deposit for a car but I’m not sure if I have to pay tax on it? And if I do, how do I go about it?

The answer…

Short answer, yes.

Long answer, still yes, but working out how much is going to be a bit complicated.

Even though we think of cryptocurrency as money that we can use to buy services or products, the taxman in the UK considers it an investment.

Like all investments – such as shares, funds, property, wine, or cars – this makes it an asset from HMRC’s point of view. That’s if you bought your crypto.

You’ve also mentioned that you were paid in Bitcoin for some work you did – that’s different and is counted as income.

When you sell the Bitcoin you bought, it’s liable for capital gains tax. For the earned Bitcoin, you may need to pay income tax and national insurance.

While you personally will owe some tax, even those who end up owing nothing to HMRC still need to register for self-assessment and, crucially, file a 2024/25 return before January 31, 2026. To do this, you’ll need to set up an account on the Government’s website.

Any tax owed must be paid by this date or you’ll start to rack up late payment penalties. I suggest you get on this immediately so you can submit the return as early as possible, giving HMRC time to calculate what you owe and you time to pay it.

Once you’ve set up your account, you’ll then need to work out your gain on the Bitcoin you bought; this is normally the difference between what you paid for an asset and what you sold it for.

However, making life more complicated (though this particular complexity is welcome) is that all UK adults are entitled to make a capital gain up to £3,000 tax-free for the tax year between April 6, 2024, and April 5, 2025.

For the Bitcoin you earned, how much income tax and national insurance you owe will depend on how much you earned overall in that tax year overall and whether you pay tax at the basic or higher rate.

Your best bet is to follow HMRC’s guidance as best you can – this is typically available as you fill out the return and/or on the website, and authority has also put together the below video on how cryptoassets are taxed, which I recommend you watch.

More mind-bending news I’m afraid.

Bear in mind that you may also need to pay tax on interest you earn on any cash savings you hold outside of an ISA – if that exceeds your personal savings allowance.

This is £1,000 if you’re a basic rate taxpayer and £500 if you’re a higher rate taxpayer.

If you earn income from dividends or any other sources, tax is payable above any tax-free personal allowances, and capital gains tax is also payable on any profit you make from selling certain other assets above your £3,000 tax-free allowance. These include shares and other investments, property (except your main home) and various others.

Confused yet?