Many UK miners have heard that the first £1,000 of mining income is tax free. That is partly true. The £1,000 trading and miscellaneous income allowance can shelter small mining receipts from income tax. What those guides rarely explain is that a second tax applies when you eventually sell, swap or spend those coins. This post explains both legs and why getting them right matters.
The short answer: mining rewards are taxable income when you receive them, and there is a second tax when you sell
Mining rewards are taxable in the UK the moment they land in your wallet, based on their sterling value on that day. For most individual miners, HMRC classes this as miscellaneous income. If your mining activity rises to the level of a trade, it becomes trading income instead. Either way, that receipt value then becomes your base cost for Capital Gains Tax when you later dispose of the coins. The £1,000 trading and miscellaneous income allowance can reduce or remove the income tax charge on small receipts, but it has no effect on the CGT that arises at disposal. Mining below £1,000 a year is not the same as mining tax free.
Income at receipt: sterling value on the day the reward lands
Under HMRC's Cryptoassets Manual at CRYPTO21150, mining rewards are valued in sterling at the point of receipt. If you mine 0.01 BTC on a day when Bitcoin is worth £50,000, you have received £500 of income. That £500 is what goes on your Self Assessment return as miscellaneous income (or trading income if applicable). The value of those coins a year later, when you decide to sell, is irrelevant for this leg of the calculation.
This means you need a record of the sterling value of every reward on the day it arrived. Many miners track portfolio value in their chosen currency but not the per-reward sterling receipt value. That gap creates a records problem that compounds over time.
Hobby mining vs a mining trade: the misc-vs-trading-income boundary and why it changes the tax
HMRC does not publish a bright line separating hobby mining from a mining trade. Instead, the same badges-of-trade analysis that applies to share-dealing applies here: the scale of activity, the level of organisation, the commercial intent, whether profits are the primary motive, and whether there is a systematic approach to the operation.
| Feature | Miscellaneous income (typical hobby miner) | Trading income (mining as a business) |
|---|---|---|
| Tax treatment | Income tax on receipts above allowances; losses cannot be offset against other income | Income tax on profits; trading losses may be relievable against other income |
| Rate | 20%, 40% or 45% depending on total income | 20%, 40% or 45% plus Class 4 National Insurance (6% on profits £12,570 to £50,270; 2% above) |
| Who it applies to | Most individual miners operating one or a few rigs at home | Miners running at commercial scale with an organised, profit-focused operation |
| Second-leg CGT | Applies at disposal on gain above receipt value | Applies at disposal on gain above receipt value (same two-step) |
Trading status is not a prize. The income tax rates are the same, and Class 4 National Insurance is added on top. The main advantage of trading status is the ability to offset genuine trading losses against other income, which is a narrow benefit for most miners. If you are unsure which category applies to your operation, speak to us before filing.
Note: whether specific mining costs such as electricity and hardware are deductible, and how that deductibility works under each treatment, depends on the facts of your case. We do not state a universal rule here. If expenses are a significant consideration for you, speak to us.
The £1,000 trading and miscellaneous income allowance: what it does and what it does NOT do
The trading and miscellaneous income allowance gives every individual a £1,000 exemption against trading or miscellaneous income in a tax year. If your total mining receipts (plus any other miscellaneous or trading income) stay below £1,000, you have no income tax to report on them. If your receipts are above £1,000, you can either use the allowance to reduce taxable receipts by £1,000, or deduct actual allowable expenses instead (whichever is more beneficial).
What the allowance does NOT do:
- It does not remove Capital Gains Tax on the later disposal of mined coins.
- It does not reduce your CGT base cost to zero. Your base cost is still the sterling value at receipt, regardless of whether income tax was charged.
- It does not exempt coins from being reportable assets for CGT purposes.
See also HMRC's guidance on receiving cryptoassets for confirmation that the two-step applies independently of the allowance.
The second leg: the receipt value becomes your CGT base cost
When you dispose of mined coins (by selling for fiat, swapping for another token, or spending them on goods or services), CGT applies to the gain above your base cost. Your base cost is the sterling value of the reward on the day you received it, which is the same figure that was (or would have been) your income tax starting point.
The CGT annual exempt amount is £3,000 (frozen for 2026/27). You can apply this against total capital gains across all assets in the tax year. Gains above the exempt amount are charged at:
- 18% on the part of the gain within your remaining basic-rate band (the basic-rate band ceiling is £37,700 of taxable income for 2026/27)
- 24% on any gain above that boundary
- 24% on the whole gain if you are a higher or additional-rate taxpayer
Do not rely on a flat 18% rate. The correct rate depends on how much of your basic-rate band is already used by your income.
Worked two-step illustration (figures are illustrative only, not a filing figure)
| Step | Detail | Amount |
|---|---|---|
| Receipt (income leg) | 0.05 BTC mined; BTC at £40,000 on receipt date | £2,000 miscellaneous income |
| Trading/misc allowance applied | £1,000 allowance reduces taxable income | £1,000 taxable at your income tax rate |
| Base cost established | Sterling value at receipt (before allowance offset) | £2,000 base cost for CGT |
| Disposal (CGT leg) | 0.05 BTC sold later; BTC at £60,000 on disposal date | £3,000 proceeds |
| Capital gain | £3,000 proceeds minus £2,000 base cost | £1,000 capital gain |
| Annual exempt amount | £3,000 AEA, assuming not already used | £0 CGT due on this gain (covered by AEA) |
In this example the AEA covers the CGT. In practice, if you mine regularly or hold other assets, the AEA is often exhausted before you reach your mining disposal. Every crypto-to-crypto swap also triggers a disposal, so the AEA can disappear quickly for active holders.
Why the £1,000 allowance does not make mining "tax free"
The allowance eliminates the income tax charge on receipts below £1,000. It does not eliminate the CGT charge on the subsequent gain. Even if you had zero income tax to pay on a mining reward (because receipts were below £1,000), your base cost is still set at the sterling value of those coins on receipt. When you later sell at a higher price, CGT applies to the difference.
If you mined coins worth £800 (below the allowance, so no income tax) and later sold them for £5,000, the capital gain is approximately £4,200 (£5,000 minus £800 base cost). Only the first £3,000 of total gains across all assets is covered by the annual exempt amount. The balance is chargeable at 18% or 24% depending on your income.
The "mining is tax free under £1,000" claim is therefore accurate only for the income tax leg, and only in that tax year. The CGT obligation deferred to the disposal year remains.
Keeping the records HMRC and CARF will expect
HMRC expects you to keep a record of:
- The date of each mining reward
- The sterling value of each reward on the day of receipt (this is your income figure and your CGT base cost)
- The number of coins received in each reward
- The date, proceeds, and disposal method when you sell or swap those coins
From 1 January 2026, UK cryptoasset platforms are required to collect user and transaction data under the Cryptoasset Reporting Framework (CARF). The first report to HMRC covers the 2026 calendar year and is due between 1 January 2027 and 31 May 2027. See HMRC's CARF collection guidance and reporting guidance. Mining rewards that pass through an exchange will be visible to HMRC. Gaps in your records are likely to be noticed.
If you have several years of mining activity without complete records, speaking to us about a voluntary disclosure is usually far better than waiting for HMRC to open an enquiry.
Getting the two-step right
The income and CGT legs of mining tax are straightforward in principle but easy to get wrong in practice: receipt values misrecorded, disposal proceeds entered without a matching base cost, the allowance applied to the wrong figure, or the disposal not reported at all because "I am under the £1,000 limit".
Our staking and mining income estimator can help you size up the two legs for a given scenario. It is a planning and estimation tool; it does not account for same-day and 30-day matching rules, pooling across multiple reward receipts, or the interaction with other gains in the year. If your situation has any of that complexity, it will tell you to speak to us rather than produce a figure you should rely on.
For miners who want the two legs handled correctly from receipt to disposal, including records, Self Assessment filing, and the misc-vs-trading judgment, see our miners hub or visit our crypto Self Assessment service.