Mining and
Staking Tax.

HMRC makes a critical distinction. Most individual miners with a few GPUs or an ASIC at home are treated as carrying out a “miscellaneous activity.” Their rewards are miscellaneous income taxed under normal income tax rules. They cannot offset mining costs against the income.

If mining rises to the level of a trade — large scale, commercial organisation, systematic profit motive — it is taxed differently. Trading miners can deduct allowable business expenses: electricity, equipment, repairs, accountancy fees.

The test is not simply how much hardware you run. HMRC looks at the commercial nature of the operation. Someone running a warehouse of ASIC miners with staff and a formal business structure is almost certainly trading. Someone with two GPUs in a spare bedroom is almost certainly not.

Worth knowing: even if you are a hobby miner with no deductible costs, you can still deduct electricity costs attributable to mining when calculating CGT on eventual disposals. The deduction timing differs, not the availability.

For miners classified as trading, the following costs are deductible against trading income:

Electricity. The additional electricity cost of running mining hardware, calculated by subtracting your normal household usage from your total consumption. You need meter readings or smart meter data to support this.

Hardware depreciation. Mining equipment is a capital asset. If you are trading, you can claim capital allowances (typically Annual Investment Allowance) on hardware costs. For hobby miners, hardware cost can feed into your CGT cost basis when you sell the equipment.

Pool fees. Fees paid to mining pools are deductible as a business cost for trading miners. For hobby miners, they are an allowable cost against any CGT on the mined coins.

Internet and cooling. Proportionate costs for internet connection and cooling infrastructure directly attributable to mining are deductible for trading miners.

In practice, hobby miners should still track all costs carefully. Those costs shift from income deductions to CGT deductions on eventual disposal — the tax relief is not lost, just delayed.

Staking rewards are almost always classified as miscellaneous income, not trading income. HMRC published specific guidance on this in 2022. The rewards are taxed as income on the day you receive them, at the sterling value that day.

The same dual-tax structure applies. You pay income tax when you receive staking rewards. If those rewards later increase in value and you sell, the gain above the income tax value is subject to CGT. If they fall below that value, you have a capital loss.

Unlike trading miners, stakers generally cannot deduct costs against their staking income. There is no hardware depreciation for holding ETH in a staking contract. If you run a validator node, the position is more nuanced and worth discussing with an adviser.

DeFi adds complexity. When you deposit assets into a liquidity pool or yield farming protocol, HMRC's position is that this may constitute a disposal if you receive a different token in return (such as a liquidity pool token).

Rewards earned through DeFi protocols are taxed as miscellaneous income when received. Each reward token should be valued in sterling on the date of receipt.

HMRC has not published definitive guidance on every DeFi scenario. The existing cryptoasset guidance is applied by analogy. If you are active in DeFi with material sums, specialist tax advice is not optional.

The record-keeping burden for miners and stakers is heavier than for simple traders. You need to track two tax events per token — receipt and disposal — not just one.

For every reward received, record: the date, the quantity received, the sterling value at that date (GBP per coin multiplied by coins received), the source (specific pool, protocol, or block reward), and the transaction hash for verification.

For stakers receiving daily or even hourly micro-rewards, this adds up quickly. Tools that connect to your wallet via API and calculate the sterling value at each receipt date are worth the subscription fee.

HMRC may accept a reasonable daily average rate for valuation rather than a per-transaction rate, where frequent small rewards make transaction-level tracking impractical. Document your methodology and apply it consistently.

David mines Bitcoin as a hobby. In 2025/26 he receives 0.1 BTC in mining rewards across the year. At the average rate of receipt, these rewards are worth £6,200 total.

David pays income tax on £6,200 as miscellaneous income. At the basic rate, that is £1,240. His cost basis for those 0.1 BTC is £6,200.

Six months later, David sells his 0.1 BTC for £8,500. His capital gain is £8,500 minus £6,200 equals £2,300. This is below the £3,000 annual exempt amount, so no CGT is due on the disposal.

If the price had fallen and David sold for £5,000, he would have a £1,200 capital loss to register with HMRC and carry forward.