Staking rewards create two separate tax events, and most people report only one of them. The reward is taxable when you receive it, at its sterling value on that date. That same value then becomes the acquisition cost of the tokens, which enter your section 104 pool — so when you later sell, Capital Gains Tax applies only to the movement in value since receipt. Missing the second half means overpaying. Missing the first means underpaying.
Income or trading? HMRC’s test
HMRC treats staking rewards as trading income if the activity amounts to a trade, and otherwise as miscellaneous income, valued in sterling at the date of receipt with expenses deductible (CRYPTO21200 for individuals, CRYPTO40250 for businesses). Whether it is a trade turns on “a range of factors such as: degree of activity, organisation, risk, commerciality”, read with the general badges of trade.
In practice most individual stakers are not trading — HMRC says elsewhere that only in exceptional circumstances would it expect an individual’s crypto activity to amount to a financial trade. Miscellaneous income is therefore the usual answer, and a £1,000 annual allowance is available across miscellaneous income. Above £2,500 you must register for Self Assessment.
The four kinds of staking — and why HMRC does not distinguish them
| Type | What happens | Position |
|---|---|---|
| Native protocol staking Delegating to a validator, keys retained | You keep beneficial ownership; rewards accrue | The clearest case. Income on receipt, base cost into the pool, CGT on later disposal. |
| Running your own validator or node | Capital outlay on hardware, a bonded stake, ongoing operating costs, slashing risk | The strongest case for a trade: real organisation, real risk, real commerciality. If it is a trade, profits are trading profits, the £1,000 trading allowance may cover small-scale activity, and equipment and electricity become deductible — a materially different and often better outcome. Worth having analysed properly. |
| Exchange or custodial staking Platform “earn” products | The platform takes control of the tokens | Unresolved. If control passes such that beneficial ownership transfers, HMRC’s DeFi analysis at CRYPTO61620 could treat the deposit itself as a disposal at market value. HMRC has published no platform-by-platform view; the terms and conditions of the specific product govern the answer. |
| Liquid staking and restaking stETH, rETH and similar; restaking protocols | You give up one token and receive a different one | Not addressed anywhere in HMRC’s guidance. Receiving a different token in exchange looks like a disposal on ordinary principles, but HMRC has said nothing specific. Genuinely uncertain — document the position and consider disclosure rather than guessing. |
The dry tax charge — and the relief arriving in 2027
Where a staking or liquidity arrangement does transfer beneficial ownership, HMRC’s position is that a disposal occurs at that moment, at market value — even though you have not cashed out and have no sterling with which to pay the resulting tax. This “dry” charge is the harshest feature of the current regime.
Relief is coming, but not yet. A measure announced at Budget 2025 will treat certain disposals involving cryptoasset loans and liquidity pools as no gain, no loss, deferring the charge until an economic disposal actually occurs. It takes effect on 6 April 2027 and is stated to affect individuals and trustees entering into cryptoasset loan and liquidity pool arrangements; the policy paper does not address companies. For 2025/26 and 2026/27 the existing analysis still applies in full.
Frequently asked questions
When exactly is a staking reward taxable?
On receipt, at its sterling value on that date — not when you sell it, and not when you withdraw to your bank. Where rewards accrue continuously, establishing the point of receipt for each tranche is part of the work.
Am I paying tax twice on the same coins?
Not on the same value. Income Tax applies to the value at receipt; Capital Gains Tax then applies only to the increase in value after that, because the amount already taxed as income becomes your acquisition cost. Two charges on two different slices of value. What causes genuine double taxation is failing to carry that base cost through.
Is there a tax-free allowance for staking?
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. This is separate from the capital gains annual exempt amount, which is £3,000 for 2026/27.
I run a validator. Can I deduct hardware and electricity?
If the activity amounts to a trade, yes, on normal principles including capital allowances on equipment. If it does not, expenses are still deductible against the miscellaneous income — but you cannot deduct equipment and electricity against a later capital gain. HMRC is explicit that those costs are not allowable for CGT, because they were not incurred on acquiring the tokens.
Does staking income go through Making Tax Digital?
No. HMRC defines qualifying income for Making Tax Digital for Income Tax as total income from self-employment and property, and states that all other sources of income do not count. Staking, mining, lending and DeFi rewards taxed as miscellaneous income therefore do not count toward the threshold and stay in the ordinary Self Assessment return. Crypto income forming part of a genuine sole trade would be different.
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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