The Tax Side of Crypto: Planning for Realised Gains
We recently started a short series on crypto, driven by a growing number of conversations with clients looking to realise gains and diversify their assets.
In many cases, these are early adopters, people who have lived through crypto’s highs and lows and are now moving from asking “Was this a good investment?” to a far more important question:
“What do I do now?”
Without planning, tax can quickly become a hidden risk when gains are realised. While taxes can’t be avoided, planning before selling helps create clarity, avoid surprises and align decisions with a wider financial plan.
From holding to realising why tax suddenly matters
There are two common challenges when it comes to crypto wealth.
First, from a behavioural perspective, selling something that has been built up over many years can be emotionally difficult. Second, once assets are sold or exchanged, gains may become taxable.
Crypto adds another layer of complexity because of its extreme volatility. Selling at different points can lead to very different outcomes, not just in value, but in tax exposure as well.
This is why timing, sequencing and planning matter more than reacting to price movements alone.
How crypto is taxed in the UK (at a high level)
Tax rules can change, and we would always recommend working alongside an accountant to ensure the correct tax is paid. However, at a high level:
Most crypto gains fall under Capital Gains Tax (CGT)
Everyone has an annual CGT allowance, which can reduce the amount subject to tax
The rate of tax depends on whether you are a basic or higher-rate taxpayer
Tax is generally triggered when crypto is disposed of, not simply when it is held.
Common crypto tax traps we see
Many of the tax issues we see with crypto also apply to other assets, but they are often amplified by complexity and record-keeping challenges.
Common examples include:
Ignoring crypto-to-crypto trades
Losing track of transaction history
Forgetting to set aside cash for taxes
Letting emotions dictate timing rather than planning
While holding crypto does not usually create a tax liability, the moment any disposal takes place, tax can be triggered. With increased scrutiny from HMRC across the sector, failing to plan or set aside funds for tax can become a costly mistake.
Diversification: from growth to sustainability
People invest in crypto for different reasons. In its early days, it was often seen as a speculative opportunity with the potential for significant growth and equally significant volatility.
For many early adopters, the focus is now shifting. Rather than pure growth, the question becomes how those gains can support long-term objectives, including future income.
Realised gains can, in some cases, be redirected into more tax-efficient environments such as pensions or ISAs. More broadly, selling part of a crypto holding can help diversify assets and reduce exposure to a single, highly volatile area.
Planning before you act
One of the biggest challenges in investing is deciding when to act.
With crypto, this often shows up as a fear of selling too early and missing out on further gains. Waiting for the “perfect” moment can easily lead to inaction.
One approach we often discuss is an effective reverse pound-cost averaging strategy, setting planned dates or stages for selling, regardless of short-term market movements.
This helps:
Remove emotion from the decision
Create structure
Align sales with wider tax and financial planning
Reflections
Crypto has rewarded some early investors in a way that can be genuinely life-changing. The challenge is ensuring those gains are protected and used effectively for the future.
Tax and financial planning are not about unnecessary complexity. They are about clarity and about integrating crypto into a wider, long-term plan rather than treating it in isolation.
Frequently Asked Questions
When do I pay tax on crypto in the UK?
Tax is usually triggered when crypto is disposed of, such as selling, exchanging, or using it, not while it is simply held.
Are crypto-to-crypto trades taxable?
In many cases, yes. Exchanging one crypto asset for another may constitute a disposal for tax purposes.
Do I need to keep records of crypto transactions?
Yes. Accurate records of transactions, values and dates are essential for calculating gains and meeting HMRC requirements.
Can crypto gains be used for retirement planning?
In some cases, realised gains may be used to support long-term planning, such as diversification or contributions to tax-efficient wrappers, depending on individual circumstances.
Should I speak to an accountant about crypto tax?
Yes. An accountant can help ensure the correct tax is paid. Financial planning then helps align decisions with wider goals.
Important note
This article is distributed for educational purposes only and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy, or investment product. Reference to specific products is made only to help make educational points and does not constitute any form or recommendation or advice. Information contained herein has been obtained from sources believed to be reliable but is not guaranteed.