Is cryptocurrency
tax deductible?

No. Buying cryptocurrency is an investment, not a business expense (GOV.UK). When you sell, swap or spend it, you may owe Capital Gains Tax on any gain (GOV.UK). If customers pay you in crypto, the sterling value when received is business income.

Some sole traders hold crypto, and some accept it as payment. Neither makes it a business expense. Buying crypto is putting money into an asset. The tax happens when you dispose of it, usually as a capital gain, and when you receive it for work, as income.

Is cryptocurrency tax deductible?

The HMRC rule

Money taken from the business for personal use, savings and investments, loan capital repayments and your own tax are not expenses. Some have their own relief elsewhere on the tax return. The rule comes from Check if you need to pay tax when you sell cryptoassets, Expenses if you’re self-employed.

Only costs incurred wholly and exclusively for the business are allowable (expenses overview). GOV.UK explains that you may need to pay Capital Gains Tax when you sell, exchange, spend or give away cryptoassets (cryptoassets). HMRC's Cryptoassets Manual covers the treatment of crypto received as payment (Cryptoassets Manual).

When you can claim it

• Deduct allowable costs, such as transaction fees, when working out a capital gain.
• Use capital losses on crypto against capital gains.
• Use the £3,000 Capital Gains Tax annual exempt amount.
• Record crypto received for work at its sterling value, with normal business expenses against it.

When you cannot

• Deduct crypto purchases from business profit.
• Deduct crypto losses from trading profit.
• Ignore crypto payments received for work.
• Treat crypto as a business expense because it was bought from the business account.

What to claim instead

Keep a record of every crypto transaction: date, amount, sterling value and fees. HMRC uses pooling and matching rules to work out gains. If you accept crypto as payment, record the sale at the sterling value when received.

How to decide if you can claim it

1. Was it for the business? A cost is only allowable if you incur it wholly and exclusively for the business. If it also serves a personal purpose that cannot be separated, such as clothing that keeps you warm or a meal that keeps you going, HMRC disallows it.
2. Is part of it personal? Where a cost has a business part you can identify, such as the business calls on a phone bill or the business miles in a car, you claim that part and leave the rest out, on a reasonable basis you can explain.
3. Is it a running cost or something you keep? It is not a cost of running the business at all, so the accounting basis makes no difference: it never goes in your expenses, although it may have a relief of its own elsewhere on the return.
4. Is there a specific rule? For cryptocurrency, the deciding rule is payments that are not business costs: money taken from the business for personal use, savings and investments, loan capital repayments and your own tax are not expenses. Some have their own relief elsewhere on the tax return.

Worked example: a freelancer paid in crypto

A freelance developer invoices £2,000 and is paid in crypto worth £2,000 when received. That £2,000 is business income. She later sells it for £2,600, making a £600 capital gain. Separately, she buys £1,500 of bitcoin as an investment, which is not an expense.

Investment or trading

For almost everyone, buying and selling crypto is investment, taxed under Capital Gains Tax. Trading crypto as a business is rare and depends on factors like frequency, organisation and intention. HMRC's manual says most individuals are not trading.

Capital Gains Tax

When you sell, swap or spend crypto, a gain or loss arises. Gains above the £3,000 annual exempt amount are taxed at 18% or 24%, depending on your income. Losses can be set against gains. The Self Assessment return has a specific section for cryptoasset disposals.

Crypto as payment

If you accept crypto for goods or services, the sterling value on the day you receive it is business income. If the value then changes before you sell or spend it, that is a capital gain or loss.

Reporting to HMRC

Under the international Cryptoasset Reporting Framework, UK crypto service providers collect users' details and transaction information from 1 January 2026, and report it to HMRC. Make sure your return reflects your disposals.

Paying from the business account

Sole traders often pay personal costs from the account they use for the business. That is allowed, but the payment is drawings, not an expense. Record it that way so it does not end up in your expense totals. If your accounts do include it, the full self-employment pages have a disallowable column, box 45 for other expenses, where the same amount is added back.

Mining and staking

Rewards from crypto mining or staking are usually taxable as miscellaneous income when received, or as trading income if the activity is a business. The costs of mining, such as electricity and equipment, are only allowable against it where it is taxed as a trade.

Paying suppliers in crypto

If you pay a supplier in crypto, the business expense is the sterling value of what you paid, and the disposal of the crypto can also create a capital gain or loss for you.

Where it goes

Crypto purchases go nowhere on the business pages. Crypto received for work is part of turnover. Disposals go on the capital gains pages.

Where it goes on your return and in MTD

Because it is not allowable, a sole trader leaves it out of expenses altogether. If it went through your business account, record it as drawings or a non-business payment, and if your accounts include it, add the same amount back in the disallowable column of the full self-employment pages.

If your turnover was under £90,000, you can use the short self-employment pages (SA103S), which ask for a single figure for total allowable expenses rather than a box-by-box breakdown, and the full pages let you give just a total in box 31 too. The category still matters for your own records and for Making Tax Digital, where each quarterly update uses the same categories unless you choose to send one consolidated figure.

Most sole traders now use the cash basis, the default from the 2024/25 tax year, which counts a cost when you pay it. On traditional accounting you count it when you incur it, and equipment you keep goes through capital allowances rather than expenses.

How much an allowable cost saves

The value of a deduction is the tax it removes from your profit, not the cost itself. At the basic rate a sole trader saves 26p for every pound of allowable expense, at the higher rate 42p, and in the personal allowance taper between £100,000 and £125,140 as much as 62p. Landlords pay no Class 4 on rental profit, so they save 20p or 40p.

What £1,000 of allowable expense saves a sole trader in 2026/27

• Basic rate (20% + 6%)£260
• Higher rate (40% + 2%)£420
• Additional rate (45% + 2%)£470
• Allowance taper band (60% + 2%)£620

Records to keep

Keep a full transaction history: dates, amounts, sterling values, fees and wallet addresses. Exchanges can close or lose data, so export statements regularly.

From 6 April 2026, sole traders and landlords with qualifying income over £50,000 keep these records digitally and send quarterly updates under Making Tax Digital, falling to £30,000 from April 2027 and £20,000 from April 2028. The MTD requirement checker shows when it applies to you.

Common mistakes

• Deducting crypto purchases from profit.
• Not declaring crypto received as payment.
• Losing transaction records needed for gains.

Related expenses

This item sits in the other business expenses category, alongside art and collectibles, care home fees, charity donations, clothing and workwear, fines and penalties, funeral costs, furniture and glasses and eye tests. The A to Z of expenses answers the same question for every other cost.

TapTax sorts each cost into the right category as you record it, applies the business share where you set one, and keeps the receipts with the figures, ready for your quarterly updates and final return.