What you need to know: Crypto staking tax UK: income vs CGT
Quick answer: Staking rewards are income at the moment of receipt , valued in GBP at that time. They're taxed at your marginal income tax rate (20%/40%/45%) plus possibly NI if HMRC treats it as a trade (rare for retail). When you later dispose of the staked token, CGT applies on any gain since…
Key points:
- You stake 10 ETH, earning 0.5 ETH over a year. The 0.5 ETH is received in monthly rewards of ~0.042 ETH.
- Each month's 0.042 ETH is valued at its GBP price at the moment of receipt.
- The total over the year is your taxable income from staking. Reported on Self Assessment as "miscellaneous income" (for hobby stakers) or "self-employment income" (rare — for genuine traders).
Staking rewards are income at the moment of receipt, valued in GBP at that time. They're taxed at your marginal income tax rate (20%/40%/45%) plus possibly NI if HMRC treats it as a trade (rare for retail). When you later dispose of the staked token, CGT applies on any gain since receipt — the cost basis is the GBP value at receipt, not the original purchase cost. So staking creates two tax events per reward: income tax at receipt, CGT at disposal.
The two-step taxation
Step 1 — Income at receipt:
- You stake 10 ETH, earning 0.5 ETH over a year. The 0.5 ETH is received in monthly rewards of ~0.042 ETH.
- Each month's 0.042 ETH is valued at its GBP price at the moment of receipt.
- The total over the year is your taxable income from staking. Reported on Self Assessment as "miscellaneous income" (for hobby stakers) or "self-employment income" (rare — for genuine traders).
Step 2 — CGT at disposal:
- When you later sell, swap, or otherwise dispose of the staked ETH (including the rewards), CGT applies.
- Cost basis for the rewards = the GBP value at receipt (already taxed as income).
- Gain or loss = sale proceeds in GBP minus cost basis.
Worked example — typical staker
Stake 10 ETH (cost £15,000) for a year
| Year 1: receive 0.5 ETH in rewards, average ETH price during year = £2,000 | |
| Staking income = 0.5 × £2,000 = £1,000 — taxed at marginal rate (say 40%) | Income tax £400 |
| Total ETH held at end of year: 10.5 ETH; cost basis: £15,000 + £1,000 = £16,000 | |
| Year 2: sell all 10.5 ETH at £3,000/ETH = £31,500 proceeds | |
| Capital gain = £31,500 − £16,000 = £15,500 − £3,000 allowance = £12,500 taxable | |
| CGT at 24% (higher rate) | £3,000 |
| Total tax over 2 years | £3,400 |
The rewards have been taxed once as income (£400) and the gain on disposal taxed at CGT (£3,000). Without the cost basis step-up, the rewards would have been taxed at CGT on the full £1,500 they appreciated to — meaning the income-tax step prevents double-taxation of the same gain.
Staking through exchanges vs self-custody
For tax purposes, the source of staking is irrelevant — Coinbase, Kraken, Binance, or your own validator all produce the same outcome. What matters is:
- When did you receive the reward (timestamp of the on-chain transfer or exchange credit).
- What was the GBP value at that moment.
- What's your cost basis for the staked principal.
Exchanges that offer "staking" sometimes auto-compound — meaning rewards land in your account at intervals (e.g. daily). Each compound is a separate income event. The volume of taxable events can be enormous for daily-compounding products.
Liquid staking — Lido, Rocket Pool, Frax
Liquid staking adds a wrinkle. You stake ETH on Lido; you receive stETH (or rETH for Rocket Pool, etc.) — a "liquid" token representing your stake. HMRC's view on this is currently:
- Depositing ETH for stETH may or may not be a disposal — depends on whether HMRC accepts the stETH as the same beneficial ownership.
- The rebase mechanism (where stETH balance increases to reflect staking rewards) is income at the moment of rebase, valued at GBP.
- Eventually unstaking (stETH → ETH) is typically a disposal of stETH.
HMRC hasn't issued definitive guidance on liquid staking specifically. The conservative position: treat stETH as a new asset (so the initial deposit IS a disposal of ETH). The aggressive position: treat stETH as the same as ETH (no initial disposal).
"Hobby" vs "trade" — usually hobby
HMRC distinguishes between:
- Hobby staking: Casual, low-frequency. Income taxed as "miscellaneous income" (no NI).
- Trading staking: Frequent, organised, sophisticated, profit-motive. Income taxed as self-employment (subject to NI).
HMRC applies the "badges of trade" test: frequency, organisation, profit motive, time spent, scale. For most retail stakers earning < £10k/year of rewards, hobby treatment applies. For miners running multiple validators commercially, trade treatment is correct.
Tax-free thresholds that apply
- Miscellaneous income trading allowance: First £1,000/year of miscellaneous income (combined with side hustle income) is tax-free.
- Personal Allowance: If total income is below £12,570, no income tax due.
- CGT allowance: £3,000/year of CGT-free gains.
Combining: a stay-at-home parent with no other income could earn up to £12,570 of staking rewards before paying income tax, plus dispose of up to £3,000 of gain free of CGT each year. Some retail stakers structure deliberately to use these.
Sources and methodology
HMRC's staking guidance is in the Cryptoassets Manual, particularly CRYPTO40000 (miscellaneous receipts) and CRYPTO22000 (CGT). For complex staking positions, see the tax adviser recommendation. The methodology page documents sources.
Related crypto tax guides
How UK Tax Drag holds itself to account
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