How to Report NFT Profit in UK: Complete HMRC Tax Guide

Introduction: Navigating NFT Taxation in the UK

As Non-Fungible Token (NFT) trading surges in popularity, UK investors must understand how to report profits to HMRC. Whether you’re an artist, collector, or trader, NFT sales can trigger Capital Gains Tax obligations. This comprehensive guide breaks down HMRC’s rules for reporting NFT income, helping you stay compliant while maximising allowances.

Are NFT Profits Taxable in the UK?

Yes. HMRC treats NFTs as taxable assets under Capital Gains Tax (CGT) rules. Profits from selling NFTs are subject to CGT if they exceed your annual tax-free allowance (£3,000 for 2024/25). Trading NFTs frequently may even classify you as a professional trader, making profits liable for Income Tax instead.

How HMRC Classifies NFT Transactions

Your tax treatment depends on activity type:

• Personal Investment: Occasional sales fall under CGT
• Business Activity: Frequent trading or creating NFTs may incur Income Tax and National Insurance
• Mining/Staking Rewards: Treated as miscellaneous income

Step-by-Step Guide to Reporting NFT Profits

1. Calculate Your Gains: Subtract purchase price, minting fees, and transaction costs from sale proceeds
2. Apply Allowances: Deduct your annual CGT exemption (£3,000)
3. Report via Self Assessment: File a SA108 Capital Gains supplementary form
4. Pay Tax Owed: Settle liabilities by January 31st following the tax year

Calculating Your NFT Gains and Losses

Use this formula: Gain = (Sale Price – Purchase Price) – Allowable Costs. Allowable costs include:

• Gas fees and blockchain transaction charges
• Platform commissions (e.g., OpenSea fees)
• Minting expenses
• Valuation fees for high-value NFTs

Losses can be offset against other capital gains in the same tax year or carried forward.

Deadlines and Penalties for Late Reporting

Key deadlines:

• October 31st: Register for Self Assessment if newly required
• January 31st: File tax return and pay owed CGT

Penalties start at £100 for late filing and accrue daily interest on unpaid tax. Deliberate non-compliance may result in fines up to 100% of tax owed.

Keeping Records for NFT Transactions

Maintain these documents for 5 years after filing:

• Wallet addresses and transaction IDs
• Dated purchase/sale receipts
• Exchange rate records at transaction time (HMRC uses HMRC exchange rates)
• Calculations for cost basis and gains

NFT Tax Reporting FAQs

Do I have to pay tax on NFT profits?

Yes, if your total taxable gains exceed the £3,000 annual CGT allowance. Losses can offset gains.

How do I calculate the gain or loss on an NFT?

Subtract the original purchase price and allowable costs from the sale price. Use GBP values at transaction time.

What if I sell an NFT at a loss?

Report the loss on your SA108 form. It can reduce taxable gains in the same year or be carried forward indefinitely.

Are there any tax-free allowances for NFT gains?

You have a £3,000 Capital Gains Tax annual exemption (2024/25). Gains below this threshold aren’t taxed.

What records should I keep for NFT transactions?

Preserve wallet statements, transaction hashes, cost breakdowns, and exchange rate evidence for 5 years after the tax year deadline.

When is the deadline to report NFT profits?

January 31st following the end of the tax year (April 5th). For 2024/25 taxes, the deadline is January 31, 2025.