Earning crypto while you sleep? Earning while you stake, farm or provide liquidity is just part of the onchain routine. What changes in the UK is that those same rewards are treated like any other taxable income: the value they have the moment they hit your wallet matters, and whatever happens to their price afterwards sits in a completely different tax bucket. Sell or swap later, and that movement becomes a capital gain instead.

Running these strategies across Lido, Aave, Uniswap or wherever else you deploy capital means juggling rewards that arrive at different times and prices that never stay still. If you want clean numbers at the end of the year, you need a record of what came in, when it arrived and what it was worth in pounds, partly because the calculations rely on accurate inputs, and partly because organised records make future checks or adjustments straightforward

Where most people struggle isn’t the tax logic; it’s the sheer volume of data. A few months of compounding or LP positions can generate more line items than anyone wants to manage manually. Before long, the strategy is fun but the admin isn’t, and the spreadsheet becomes the bottleneck.

CryptoBooks takes that friction out of the process. It acts as your all-in-one crypto tax command centre: linking your wallets and exchanges, tracking staking, trading and DeFi activity in the background, applying the UK’s matching rules correctly and generating clean, compliant outputs in minutes. With the heavy lifting automated, you can focus on the yield, not the paperwork.

How staking and yield rewards are taxed in the UK

In the UK, cryptoassets aren’t classed as currency; they’re treated as property. That distinction shapes how income and gains are calculated. A staking or yield reward can create an income charge when the tokens are received, and a potential Capital Gains Tax (CGT) charge when those tokens are later sold, swapped or spent.

The general approach is straightforward:

• when you receive staking rewards: they’re generally taxed as income and must be valued in GBP at the moment they reach your wallet;

• when you later sell or swap those tokens: any increase in value since receipt is subject to Capital Gains Tax.

In practice, a single staking reward can create two taxable moments: one for income on receipt and another for any gain on disposal.

Once you add DeFi yield farming, liquidity pools and more complex token flows, keeping track of these numbers becomes significantly harder. UK rules require accurate records of each taxable event and its GBP valuation, even if the activity took place entirely onchain.

The result? What feels like “passive income” can turn into a record-keeping burden, unless you have a tool like CryptoBooks to automate valuations, tracking, and reporting for you.

Income vs. capital gains: the fine print that matters

When it comes to staking and yield farming, HMRC focuses on the nature of what you receive rather than the platform you use. The way your rewards are taxed depends on the nature of the activity and how predictable and structured the return is.

Staking rewards received through an exchange are often treated as miscellaneous income and must be valued in GBP at the moment you receive them.

Yield-farming and liquidity-pool returns are more nuanced: if the return is fixed or clearly defined, it may be treated as income, while rewards whose value is uncertain and only realised on disposal may fall under Capital Gains Tax instead.

Where re-staking involves receiving new tokens, that receipt can create a further income event. And when you later sell, swap or spend those reward tokens, any increase in value since receipt may give rise to Capital Gains Tax.

In cases where staking or farming activity is carried out in a regular, organised and commercial manner, HMRC could consider it a trading activity, which may bring self-employment rules and National Insurance Contributions (NICs) into scope.

Misclassifying a reward or missing a taxable event can lead to under-reporting, which HMRC views as a compliance risk. This is why an automated tracking solution like CryptoBooks becomes valuable for keeping accurate records and producing compliant reports.

Why this matters now: the reporting landscape is tightening

The era of limited visibility around crypto activity is rapidly ending. In 2025 the UK is expanding its approach to crypto tax compliance. As crypto activity becomes more integrated with regulated payment and trading systems, intermediaries face increasing obligations under AML, consumer-protection and reporting rules. In this context, the government has also signaled its intention to implement CARF – the international framework for standardised reporting of crypto transactions.

For investors and traders, this shift means that exchanges and service providers will be required to share more structured information with tax authorities once these frameworks are in place. Major platforms serving UK users, including Binance, Coinbase, Kraken and Revolut, are already preparing for tighter transparency requirements and adjusting their systems to comply with future reporting standards.

As these rules come into force, undeclared staking rewards, yield income or DeFi activity will become easier to detect through third-party data rather than through manual investigations.

Failing to declare taxable transactions accurately can still lead to significant consequences under current UK rules:

• penalties that can reach 100% of the unpaid tax in deliberate cases;

• late-payment interest charged daily at the statutory rate (7.75% per year);

• retrospective assessments where acquisition values or records cannot be evidenced.

Example

You receive a single staking reward in February 2025 worth £5,000. Because it’s received in the 2024/25 tax year, it’s taxed as income based on its GBP value on that day.

You hold the tokens and later sell them in July 2025 for £6,400, creating a £1,400 capital gain (assume your Annual Exempt Amount is already used).

If you are a higher-rate taxpayer, the figures would look like this (assuming your Annual Exempt Amount is already used):

• £2,000 Income Tax on the £5,000 reward (40%)

• £280 CGT on the £1,400 gain (20%)

If declared late, HMRC adds late-payment interest at the statutory rate (7.75% per year) and, in deliberate cases, penalties.

As reporting standards tighten and third-party data becomes more available, undeclared staking and DeFi activity becomes easier for authorities to detect. Accurate records and timely reporting remain the safest way to avoid amended assessments or additional costs.

Stay accurate: track staking and DeFi data correctly with CryptoBooks

For UK tax purposes, the critical requirement is evidence. You must be able to show the GBP value of each reward at the time of receipt, the cost basis used in your Section 104 pool and the disposal value applied when you sell, swap or spend the tokens. These figures determine both your income position and your capital gains.

In CryptoBooks we help you automate the technical steps that usually break spreadsheets.

How it works:

• connect wallets and exchanges via API or CSV;

• detect staking, farming and other reward events with their GBP values on receipt;

• apply same-day, 30-day and Section 104 matching automatically;

• separate taxable income from capital disposals with consistent cost-basis tracking;

• generate SA100 (income) and SA108 (capital gains) outputs ready for your tax return.

Each transaction is categorised and time-stamped, with the correct spot rate applied at the relevant moment. Staking and DeFi activity produce data that must be recorded precisely, and CryptoBooks structures it so your 2024/25 reporting is correct from the first reward to the final disposal.

Create your free CryptoBooks account and start tracking your staking and DeFi transactions accurately.