Mining a coin and selling it are two taxable events, under two taxes, possibly in two tax years. The sterling value on the day the coin lands is income. The growth between that day and the day you sell is a capital gain. Miss the first step and you overstate the second, because the value you were taxed on is the cost you deduct.
HMRC’s operative guidance for individual miners is CRYPTO21150, and it is about 150 words long. Whether mining is a taxable trade “depends on a range of factors”, which it lists as degree of activity, organisation, risk and commerciality. If it is not a trade, “the pound sterling value (at the time of receipt) of any tokens awarded will be taxable as income (miscellaneous income) with any appropriate expenses reducing the amount chargeable”.
Most people running a rig or two at home are in the second category. That matters: a trade brings Class 4 National Insurance at 6 per cent on profits between £12,570 and £50,270, self-employment pages and eventually Making Tax Digital. Class 2 has not been charged on profits since April 2024.
What the first step costs
Take a hobby miner who received 0.039 BTC across a single tax year in four awards, worth £620, £540, £655 and £480 at the sterling price on the day each one arrived — £2,295 in total — with £810 of attributable electricity, then sold the lot for £2,780 with a £14 fee. The values are illustrative; for scale, bitcoin was £58,880 on 7 September 2026.
The trading and miscellaneous income allowance is £1,000, and claiming it beats deducting £810 of real costs. That leaves £1,295 chargeable: £259 at the basic rate, £518 at the higher. On disposal the pooled cost is the £2,295 already taxed as income, so the gain is £2,780 less the £14 fee less £2,295, or £471 — inside the £3,000 annual exempt amount, so no capital gains tax at all.
| Mining receipts, sterling at receipt | £2,295 |
| Trading and miscellaneous allowance | £1,000 |
| Chargeable miscellaneous income | £1,295 |
| Income tax at 20% / 40% | £259.00 / £518.00 |
| Disposal proceeds | £2,780 |
| Allowable cost, plus £14 fee | £2,309 |
| Capital gain | £471 |
| Annual exempt amount | £3,000 |
| Capital gains tax due | £0 |
| Gain if base cost taken as nil | £2,766 |
Treat the mined coins as having cost nothing and the gain becomes £2,766 rather than £471, overstated by exactly the £2,295 you already paid income tax on.
The value taxed as income is not a penalty. It is the receipt for the cost you deduct later.
Where the guidance is thinner than it looks
GOV.UK’s public guidance describes that outcome plainly, but the Cryptoassets Manual states an explicit base cost rule only for the trading case, where coins enter as trading stock. For miscellaneous income CRYPTO22100 works differently: section 37 of TCGA 1992 applies, so “any consideration will be reduced by the amount already subject to Income Tax”. Reducing proceeds rather than raising cost gives the same answer on one asset, and a less obvious one once the coins sit in a pool with bought ones. If your pool is large, ask an accountant.
A second gap: CRYPTO20050 says individuals pay “Income Tax and National Insurance contributions” on mining receipts, while CRYPTO21150 charges them as miscellaneous income and mentions no National Insurance. Two HMRC pages point different ways, and we are not going to resolve that here.
What you actually do
Gross miscellaneous income between £1,000 and £2,500 means contacting HMRC; over £2,500 means registering for Self Assessment, by 5 October after the tax year. The miner above, at £2,295, is in the first band. If it is not self-employment, use form SA1.
On the capital side there is a trap worth knowing even when no tax is due. Gains before losses above the £3,000 allowance must be reported. And if you already file a return, disposals go on it once total proceeds exceed £50,000, whatever the gain: sell £52,000 of coin at a gain of £1,980 and you owe nothing and still complete the capital gains pages. Proceeds alone do not drag someone outside Self Assessment into it.
The penalties are not proportionate to small tax bills. On £259 of tax, filing more than twelve months late attracts £100, then £10 a day to a £900 maximum, then £300 at six months and £300 at twelve: £1,600 on £259 of tax, before late payment penalties and before interest, charged at 7.75 per cent from 9 January 2026.
Keep the date, quantity and sterling value of every receipt, and the pooled cost before and after each disposal, for at least 22 months past the end of the tax year, or 15 months after filing if you filed late.
Sources, retrieved 7 September 2026: HMRC Cryptoassets Manual CRYPTO21150, CRYPTO20050, CRYPTO22100, CRYPTO22150 and CRYPTO22200; Business Income Manual BIM20205 and BIM100000; GOV.UK on trading income allowances, Self Assessment deadlines and penalties, capital gains and income tax rates, self-employed National Insurance, form SA1 and record keeping; HMRC interest rates. Figures, 2026/27: allowance £1,000; annual exempt amount £3,000; CGT 18 and 24 per cent; personal allowance £12,570; Class 4 National Insurance 6 and 2 per cent; £50,000 proceeds threshold, which bites only for those already filing; late payment interest 7.75 per cent from 9 January 2026. Bitcoin £58,880, CoinGecko, 7 September 2026. Receipt and disposal values are illustrative, not market data. Contested: the manual states a base cost rule only for trading stock, and CRYPTO22100 reduces consideration under section 37 rather than raising cost; CRYPTO20050 and CRYPTO21150 disagree on National Insurance. Not a recommendation to buy, sell or hold anything, and not tax advice.