NFT tax UK: buying, selling, royalties

The buyer's tax picture

You buy an NFT for 2 ETH:

• CGT disposal of 2 ETH at the GBP price at the moment of purchase. Gain/loss compared to your section 104 pool basis for ETH.
• CGT acquisition of the NFT — cost basis = the GBP value of the 2 ETH paid (plus gas fees).

If you later sell the NFT, that's a separate CGT event using the NFT's cost basis.

Worked example — collector flipping NFTs

NFT creators — royalties are income

If you create and sell NFTs:

• Primary sale (initial mint): Income from your "self-employment" as a digital creator. Taxed at marginal rate + Class 4 NI if you cross the SE threshold.
• Royalties from secondary sales: Income at the moment of receipt, valued in GBP. Not CGT.
• If you re-mint editions: Each mint is income.

The Trading Allowance (£1,000/year tax-free) applies if NFT creation is a hobby. Above £1,000/year, register for Self Assessment and report as self-employment.

"Trader" vs "investor" classification

HMRC's badges-of-trade test applies to NFTs:

• Investor (CGT): Buy and hold. Occasional sales. Personal collection.
• Trader (income tax + NI): Frequent flipping. Sophisticated strategies. Quick turnaround. Profit-motive over collecting.

For most retail NFT collectors, investor classification applies — and CGT is the relevant tax. For full-time NFT flippers running it as a business, trader treatment may apply.

The pool problem for fungible collections

Section 104 pooling normally applies to "fungible" assets. NFTs are non-fungible by definition — each is unique. But within a collection like CryptoPunks or Bored Apes:

• HMRC's position is unclear. Each Punk is technically unique, but many trade as interchangeable economic units.
• Conservative: treat each as a distinct asset with its own cost basis and disposal calculation.
• Aggressive: pool all Punks together. Risk: HMRC challenge.

For now, treat each NFT as distinct unless you have specialist advice for your specific collection.

Record-keeping requirements

For every NFT transaction:

• Date and time.
• NFT collection + token ID.
• Crypto used to pay (token + amount).
• GBP value at the moment.
• Gas fees.
• Marketplace (OpenSea, Magic Eden, etc.).
• Wallet address.

Specialist NFT tax software exists (Recap, Koinly have NFT modules). Manual tracking is impractical for active collectors.

VAT and NFTs — usually no

HMRC has generally not pursued VAT on NFT sales for individual UK collectors. Commercial NFT marketplaces may face VAT obligations only if their UK customer base exceeds the threshold. For individuals selling NFTs as part of a trade, VAT registration would only apply if total taxable turnover exceeds £90,000 (2026/27).

Sources and methodology

HMRC's NFT guidance is in the Cryptoassets Manual. Specific NFT treatment: CRYPTO11000 and the broader cryptoassets sections. For complex creator positions, see the tax adviser recommendation. The methodology page documents sources.

Related crypto guides

• Crypto CGT guide
• DeFi tax guide
• Staking tax guide
• HMRC nudge letters
• Crypto tax calculator

Crypto is property, not currency

The foundation of the whole UK regime is that HMRC treats cryptoassets — Bitcoin, Ether, tokens and NFTs alike — as property, not as money. There is no special "crypto tax". Instead the existing rules for assets apply: chargeable disposals fall under Capital Gains Tax, and crypto received in return for work or activity falls under Income Tax. Because tokens are property, spending them is not like spending cash — it is disposing of an asset, which is why so many everyday actions are taxable events.

Four things count as a CGT disposal for an investor:

• Selling crypto for pounds (or any fiat currency).
• Swapping one token for another — a coin-to-coin trade is a disposal of the coin you give up, even though no fiat is involved.
• Spending crypto on goods or services — disposing of the token at its sterling value on the day.
• Gifting crypto to anyone other than your spouse or civil partner (gifts to a spouse are made at "no gain, no loss"; gifts to charity are also exempt).

Each disposal produces a gain or loss measured in sterling: the GBP value at disposal, less the allowable cost (the pooled acquisition cost plus transaction fees). Simply moving coins between your own wallets is not a disposal.

CGT rates, the £3,000 allowance and the matching rules

For 2026/27 the Capital Gains Tax annual exempt amount is £3,000 — the gain you can realise across all assets before any tax is due. Gains above it are taxed at 18% within your remaining basic-rate band and 24% above it, based on your total taxable income plus gains.

You cannot simply compare the price you sold at with the price you first paid. Crypto follows the same-day and 30-day "matching" rules used for shares, sitting on top of Section 104 pooling:

1. Same-day rule — disposals are first matched against any tokens of the same type acquired on the same day.
2. 30-day (bed-and-breakfast) rule — next, matched against tokens acquired in the 30 days after the disposal. This stops you selling to crystallise a loss and immediately rebuying the same coin.
3. Section 104 pool — anything left is matched against the pool: all earlier holdings of that token merged into a single average cost.

Each token type (BTC, ETH, and so on) has its own pool. The matching order is not optional, and getting it wrong is one of the most common errors HMRC's nudge letters pick up.

Worked example — CGT on plain crypto (2026/27)

When crypto is income, not CGT

Some crypto is taxed as income on receipt, valued in sterling at the moment it lands in your wallet — quite separate from any later CGT when you dispose of it. The main cases:

• Getting paid in crypto — salary, freelance fees or payment for goods is earnings or trading income, taxable (and often subject to National Insurance) like any other pay.
• Mining — usually miscellaneous or trading income depending on scale and organisation.
• Staking and most DeFi rewards — generally taxable as miscellaneous income when received, again at sterling value on the day.
• Airdrops — taxable as income where received in return for doing something or in the course of a trade; an airdrop given for nothing, unconnected to any service, can instead be outside income tax and simply enter your pool at nil cost.

The sterling value taxed as income on receipt then becomes the acquisition cost for CGT, so it is not taxed twice on the way in — only any subsequent growth is a later capital gain. The £1,000 trading allowance can cover small amounts of miscellaneous crypto income. Borderline activity (heavy mining or full-time trading) can amount to a taxable trade — see trader vs investor and our staking and DeFi guides.

Exchanges now report to HMRC

The days of crypto being invisible to HMRC are over. The UK is adopting the OECD's Cryptoasset Reporting Framework (CARF), under which exchanges and crypto service providers collect identifying details about their UK users and report transaction data to tax authorities, with data exchanged internationally. Reporting providers are expected to start gathering this information from 1 January 2026, with the first reports following.

This sits alongside the access HMRC already obtains directly from major exchanges, which has driven the wave of "nudge" letters to suspected under-reporters. Practical takeaways:

• Assume HMRC can already see, or soon will see, activity on any mainstream exchange linked to your identity.
• Make sure the details you hold at each exchange are accurate, since they will be reported.
• If you have past gains you did not declare, the crypto disclosure facility lets you correct your position before HMRC contacts you — far cheaper than waiting for an enquiry.

Combined with the record-keeping discipline set out above, the message for 2026/27 is straightforward: keep clean sterling-valued records of every acquisition and disposal, and report gains and income on time.