Crypto staking and lending rewards: income or gains

Q: What mistakes come up most often?

Waiting until sale to report. Rewards are taxed as income when received, not when converted into pounds. Treating the return as savings interest. HMRC does not regard it as interest, so savings allowances do not apply. Using the wrong value. CRYPTO23000 requires a reasonable, consistent method of converting values to sterling, and records of the method used. Missing the CGT disposal on entry. Depositing tokens for a liquidity token is an exchange and can produce a gain before any reward is paid. Poor records. GOV.UK lists the type of tokens, date received, number received, total held, sterling value and disposal details as records to keep. Crypto paid as wages follows different rules, covered in our guide to being paid in cryptoassets by your employer. Lending money, rather than tokens, through a platform is covered under peer to peer lending. If HMRC opens a check into your return, tax investigation insurance pays your accountant's fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

HMRC treats tokens you receive for staking, and most returns from lending cryptoassets or providing liquidity, as taxable income at their pound sterling value when received, normally as miscellaneous income unless you are trading. A return is only capital where it comes from growth in the value of an asset you hold rather than a reward paid for the use of your tokens. Separately, putting tokens into a lending or liquidity arrangement can itself be a disposal for Capital Gains Tax.

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How are staking rewards taxed?

HMRC’s Cryptoassets Manual at CRYPTO21200 explains that some blockchains require tokens to be staked, which weights the holder’s entitlement to newly created tokens. Whether staking is a trade depends on the degree of activity, organisation, risk and commerciality. If it is not a trade, the pound sterling value of the tokens awarded, taken at the time of receipt, is taxable as miscellaneous income, with any appropriate expenses reducing the amount chargeable.

GOV.UK guidance on receiving cryptoassets says the same for mining, staking and lending, including Decentralised Finance (DeFi): if you are not carrying on a trade, HMRC treats the tokens as other taxable income. Most individuals are not trading; CRYPTO61211 says HMRC expects an individual to be trading in DeFi lending only in exceptional circumstances.

The income charge does not wait until you sell. You are taxed on the value when the tokens are received, even if you keep them and their price later falls. Our general guide to how HMRC taxes cryptoassets covers buying and selling.

Why is a crypto lending return not interest?

Platforms often call the return interest, but HMRC disagrees. CRYPTO61110 explains that for tax purposes interest is the return for the use of money, and because HMRC does not consider cryptoassets to be currency or money, the return on lending them is not interest. CRYPTO61212 draws the consequence: provisions that apply specifically to interest do not apply. In practice that means the return is not savings income, so the Personal Savings Allowance and starting rate for savings, which cover savings income, do not shelter it.

Instead, if the return has the nature of income and you are not trading, it falls under the miscellaneous income sweep up provisions in sections 687 to 689 of the Income Tax (Trading and Other Income) Act 2005 (CRYPTO61212). Only the return is taxed as income; repayment of the tokens you lent is a capital matter (CRYPTO61213). The amount charged is the money’s worth of the tokens received, which is their sterling value. Our page on miscellaneous income explains how that charge works.

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When is a DeFi return capital rather than income?

CRYPTO61214 asks whether the return was earned by providing a service to the borrower or platform, or was realised from capital growth of an asset you own. HMRC lists factors, none decisive on its own:

A return agreed in advance, such as 5% a year, points to income; an unknown and speculative return that could produce a loss points to capital.
A return paid by the borrower or platform points to income; a return realised by disposing of a capital asset points to capital.
Recurring payments during the arrangement point to income; a one off payment on repayment is more likely capital.
Whether the lending period is fixed or indefinite, short or long.

HMRC uses the image from Ryall v Hoare: income is the fruit and capital is the tree. Where the return remunerates you for letting someone use your tokens, it is income. Where you hold a liquidity token whose value rises because the pool grows, and you realise that by disposing of it, the return may be capital and is taxed under CGT instead (CRYPTO61212). Terms vary between platforms, so HMRC expects the terms and conditions to be read in each case (CRYPTO61130).

Is putting tokens into a platform a disposal?

It can be. CRYPTO61620 says that if lending or staking transfers beneficial ownership of your tokens to the borrower or platform, you make a disposal at that moment. Being free to deal with the tokens is a strong sign the recipient owns them. Where you receive a different token in exchange, such as a liquidity token, HMRC treats it as an exchange of one token for another, with proceeds equal to the sterling value of the token received.

A change is coming. HMRC’s policy paper published on 13 July 2026 announces that from 6 April 2027 certain disposals into and out of cryptoasset lending arrangements and automated market making (liquidity pool) arrangements will be treated as no gain, no loss for individuals and trustees, deferring CGT until an economic disposal. The measure deals with Capital Gains Tax; it does not change the income treatment of the reward itself.

What allowances and reporting rules apply?

GOV.UK confirms you can get up to £1,000 a year of allowance for trading and miscellaneous income, and staking or lending income counts towards it. You must tell HMRC if your total miscellaneous income from all sources is between £1,000 and £2,500, and register for Self Assessment if it is over £2,500. If you already file a return, the income goes on it.

If miscellaneous income activities make a loss, CRYPTO21300 says the loss may be carried forward to later years. Where gross income is over £1,000, GOV.UK explains you can deduct the £1,000 allowance instead of your actual expenses, which is worth doing when expenses are smaller than the allowance.

What is the CGT base cost of reward tokens?

Tokens you keep after being taxed on them as income have a base cost equal to their value when received. GOV.UK says that if you sell a cryptoasset you paid Income Tax on, you calculate CGT on the increase in value since you received it. Under CRYPTO22200, fungible tokens of the same type go into a single section 104 pool, subject to the same day and 30 day matching rules, so reward tokens join the pool for that token at their income value.

How does this work in practice?

Illustration only. Sam stakes 20 tokens through an exchange that pays rewards each week at an advertised rate. Over the 2026 to 2027 tax year he receives 1.2 tokens, with a sterling value at each date of receipt totalling £1,800. He is not trading.

The £1,800 is miscellaneous income. After the £1,000 allowance, £800 is taxable at his income tax rate, unless he deducts actual expenses instead of using the allowance.
Because his miscellaneous income is between £1,000 and £2,500 and he does not already file a return, he must tell HMRC.
The 1.2 tokens enter his pool at a cost of £1,800. If he later sells them for £2,400, the gain is £600 before any other matching.

Had the exchange instead issued him a liquidity token that he later redeemed for more of the original token, with no agreed rate, the answer could be capital, and the deposit of his tokens could itself be a disposal.

What mistakes come up most often?

Waiting until sale to report. Rewards are taxed as income when received, not when converted into pounds.
Treating the return as savings interest. HMRC does not regard it as interest, so savings allowances do not apply.
Using the wrong value. CRYPTO23000 requires a reasonable, consistent method of converting values to sterling, and records of the method used.
Missing the CGT disposal on entry. Depositing tokens for a liquidity token is an exchange and can produce a gain before any reward is paid.
Poor records. GOV.UK lists the type of tokens, date received, number received, total held, sterling value and disposal details as records to keep.

Crypto paid as wages follows different rules, covered in our guide to being paid in cryptoassets by your employer. Lending money, rather than tokens, through a platform is covered under peer to peer lending.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.