Mining is taxed on receipt, not on sale. Tokens awarded for verifying additions to the blockchain are taxable when you receive them, at their sterling value on that date. What differs — and it differs a great deal — is whether that receipt is trading income or miscellaneous income.
The test HMRC applies
HMRC judges mining on the same yardstick it uses for staking: the “degree of activity, organisation, risk and commerciality”, read together with the general badges of trade (CRYPTO21150). If the activity does not amount to a trade, “the pound sterling value (at the time of receipt) of any tokens awarded will be taxable as income (miscellaneous income)”, reduced by allowable expenses. If it does amount to a trade, ordinary trading profit rules apply. Separately — and this is not addressed in CRYPTO21150 — the £1,000 trading allowance in Part 6A ITTOIA 2005 may cover genuinely small-scale activity.
Hobby or trade — what actually moves the needle
| Factor | Points towards a hobby | Points towards a trade |
|---|---|---|
| Scale | A single rig, or spare capacity on a gaming PC | Multiple dedicated machines, a hosted or co-located facility |
| Organisation | Ad hoc, no records, no plan | Business bank account, records, monitoring, insurance, a commercial electricity contract |
| Risk | Little capital at stake | Significant capital committed, exposure to hash rate, difficulty and energy prices |
| Commerciality | Run regardless of whether it is profitable | Managed for profit; decisions made on margin |
| Continuity | Occasional | Continuous and repeated over time |
The expense asymmetry that catches almost every miner
This is the point that costs miners real money. Against income, mining costs are deductible in the normal way — including electricity, and including capital allowances on equipment where a trade is carried on.
Against capital gains, they are not. HMRC is explicit at CRYPTO22150 that mining equipment and electricity are not allowable costs for CGT, because they were not incurred wholly and exclusively on acquiring the tokens. So if you mine coins, hold them for three years and then sell into a rising market, your power bill does nothing at all to reduce that gain. It could only ever have been relieved against the income in the year you mined.
The practical implication is that the year of receipt is the only year in which mining costs are worth anything. Miners who never registered, never reported the income and never claimed the costs frequently find they have both an unreported income liability and a permanently lost deduction.
Base cost: what your mined coins are worth for CGT
If you are not trading, the sterling value taxed as miscellaneous income on receipt becomes the acquisition cost of those tokens, and they enter your section 104 pool at that figure. If mining is a trade and tokens are appropriated out of trading stock, the trading-stock valuation becomes the base cost instead (CG69220). Getting this right is what stops the same value being taxed twice.
One more asymmetry: VAT
Mining is outside the scope of VAT. HMRC’s position at CRYPTO45000 is that it does not constitute an economic activity for VAT purposes, because there is an insufficient direct link between the service performed and the consideration received. That means no output VAT on mining rewards — and, as a direct consequence, no route to recovering input VAT on rigs and power through the mining activity itself.
Frequently asked questions
I mine a little on my gaming PC. Do I need to declare it?
Probably, but the amounts may be covered. Mining rewards are miscellaneous income where you are not trading, and a £1,000 annual allowance applies across miscellaneous income. Between £1,000 and £2,500 you should contact HMRC; above £2,500 you must register for Self Assessment.
Can I deduct my electricity?
Against the mining income, yes — on a properly apportioned basis where the supply is also domestic. Against a later capital gain on the coins, no. HMRC is explicit that electricity and equipment are not allowable for CGT.
What if I hold my mined coins rather than selling?
The income charge still arises at receipt. Holding does not defer it. It does mean a second, separate CGT computation later on the movement in value since receipt.
Is it better to mine through a limited company?
Sometimes, and it depends on scale, how the profits will be used, and whether you want capital allowances and full expense relief within a corporate structure. It also brings the corporate crypto rules into play, which are more complex than the personal ones. This is a genuine planning question rather than a default answer.
Does mining income count towards Making Tax Digital?
Only if it is a trade. HMRC defines qualifying income for MTD for Income Tax as total income from self-employment and property, and states that all other sources do not count — so mining taxed as miscellaneous income falls outside it. Trading income from a genuine mining trade would be self-employment income and therefore would count.
This page is general guidance on UK tax law as at 9 August 2026 and is not advice for any particular person or situation. Tax treatment depends on your individual circumstances and may change. Where we quote HMRC’s internal manuals, note that those manuals are guidance prepared for HMRC staff, are not law, and do not bind HMRC in an individual case. Please take advice before acting. Reviewed by the TaxDigit crypto tax team · Last reviewed 9 August 2026. Updated August 2026.
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TaxDigit is a UK cryptocurrency accountant practice. Chartered certified accountants advising miners, from hobbyists to incorporated operations, on income tax, corporation tax and capital allowances.
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