NFT Tax in
the UK.

Purchasing an NFT with fiat or with crypto does not create a tax liability on the NFT itself. The purchase price becomes your cost basis.

The catch: if you buy an NFT using crypto (say, ETH), that ETH disposal is a taxable event. You disposed of ETH at its market value on the day of purchase. If that ETH had risen in value since you acquired it, you have a capital gain on the ETH.

In practice, many NFT collectors overlook this. Buying a 0.5 ETH NFT when your ETH cost basis was 0.1 ETH creates a CGT event on the ETH — even though you never sold into pounds.

Selling an NFT for more than you paid triggers Capital Gains Tax on the difference. The calculation is: sale proceeds minus allowable costs equals your gain.

Allowable costs include: the original purchase price in GBP, transaction fees paid at the time of purchase, and gas fees paid at the time of disposal. Minting costs for NFTs you created yourself are also deductible.

Example: you buy an NFT for 1 ETH when ETH is worth £2,000. You later sell it for 1.5 ETH when ETH is worth £2,500. Your proceeds are £3,750. Your cost is £2,000 plus any transaction fees. Your gain is roughly £1,750 before deducting fees.

Selling below your cost basis creates a capital loss, which can be offset against other capital gains in the same year or carried forward. Most NFT holders from the 2021–2022 bull market are sitting on losses. Register them with HMRC. They are worth keeping.

If you create NFTs and sell them, HMRC is likely to treat this as trading income rather than capital gains. The proceeds are subject to Income Tax and National Insurance contributions at your marginal rate.

The threshold between hobby and trade is not a fixed number. HMRC looks at the “badges of trade”: frequency of transactions, whether you bought with the intention to sell, commercial motive, and whether you have a systematic approach to selling.

In practice, someone minting and selling a high-volume NFT collection will almost certainly be treated as trading. An artist who sold one NFT as an experiment might argue it was a one-off capital disposal. The line is fact-specific.

Here's the thing: creators face a dual-tax problem on subsequent disposals. If you minted an NFT, paid income tax on the mint proceeds, and then later sold the NFT for more, the secondary sale gain is subject to CGT — using the income tax valuation as your cost basis.

Giving an NFT to someone triggers CGT as if you had sold it at its current market value. It does not matter that you received no cash. HMRC treats the gift as a disposal at fair market value on the date of transfer.

The one exception is gifts between spouses or civil partners. These are treated as “no gain, no loss” disposals, meaning the recipient inherits your original cost basis rather than the current market value. This can be useful for tax planning if one spouse pays a lower rate.

Gifting to a charity is also different and may qualify for CGT relief. Get specific advice if this applies to you.

Network fees (gas fees on Ethereum, for example) paid directly in connection with acquiring or disposing of an NFT are allowable costs. They reduce your gain or increase your loss.

Worth knowing: gas fees paid for transactions unrelated to a specific disposal — such as moving an NFT between your own wallets — are generally not deductible. The cost must be incidental to the disposal itself.

During periods of high Ethereum congestion, gas fees can be substantial. On some 2021 NFT mints, gas costs exceeded the NFT value. Keeping records of every transaction hash and corresponding gas fee matters.

Many NFT smart contracts pay the original creator a royalty on every secondary sale. These royalties are income — taxable as trading income or miscellaneous income depending on your circumstances.

Each royalty payment needs to be recorded with its sterling value at the date of receipt. The cumulative total feeds into your income tax calculation for the year.