HMRC treats NFTs as cryptoassets — taxed under the same rules as other tokens. Buying an NFT triggers a CGT disposal of whatever crypto you used to pay (typically ETH). Selling the NFT triggers a CGT disposal of the NFT. Both gains feed into your annual £3,000 CGT allowance. For NFT creators, royalties from secondary sales are income (not CGT) — taxed at your marginal rate, possibly with NI if it's a trade. The same "section 104 pool" doesn't apply to unique NFTs since each is non-fungible — but does apply to fungible collections (e.g. CryptoPunks where each unit isn't economically distinct, contested).
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
Collector buys + sells an NFT in 6 months
| March 2025: buy NFT for 2 ETH (ETH price £2,000) | |
| ETH disposed: 2 × £2,000 = £4,000. ETH cost basis (from pool): £3,000 | |
| CGT gain on ETH: £4,000 − £3,000 = £1,000 | Gain 1 |
| NFT cost basis: £4,000 (+ gas fee, say £50) = £4,050 | |
| Sept 2025: sell NFT for 3 ETH (ETH price £2,500) | |
| NFT disposal: 3 × £2,500 = £7,500 | |
| CGT gain on NFT: £7,500 − £4,050 = £3,450 | Gain 2 |
| ETH received: 3 ETH at £2,500 = £7,500 acquisition basis | |
| Total gains for year: £1,000 + £3,450 = £4,450 | |
| Less CGT allowance £3,000 | |
| Taxable: £1,450 at 24% (higher rate) = £348 CGT | CGT due: £348 |
One buy-and-sell of an NFT created two distinct CGT events. Active flipping multiplies the compliance burden quickly.
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 ld only apply if 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
How UK Tax Drag holds itself to account
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