HMRC confirmed in 2022 that NFTs are cryptoassets subject to UK tax. Whether you are a collector, a trader, or a creator, your NFT activity very likely has tax implications — and the rules are different from regular crypto in some important ways.
The key difference: NFTs are not pooled
Unlike fungible tokens (BTC, ETH) which go into a Section 104 pool, each NFT is treated as a separate individual asset. There is no averaging. When you sell an NFT, your gain or loss is calculated by comparing the sale proceeds to the specific cost of that particular NFT.
Your cost basis for each NFT is what you paid for it in GBP. If you paid with ETH or another crypto, the cost basis is the GBP value of the crypto you spent at the time of purchase.
The double-event trap: buying NFTs with crypto
This is the most common NFT tax mistake. When you buy an NFT using ETH, two taxable events happen simultaneously:
- You disposed of ETH (triggering CGT on any gain in the ETH since you acquired it)
- You acquired an NFT at a cost basis equal to the GBP value of the ETH you spent
Worked example
You bought 1 ETH for £800. ETH is now worth £2,200. You spend 1 ETH to buy an NFT.
ETH disposal: Proceeds £2,200 − Cost £800 = Gain of £1,400 (subject to CGT).
NFT acquisition: Cost basis = £2,200 (the GBP value of the ETH you paid).
Selling, minting, and royalties
Selling an NFT: Your gain is sale proceeds minus cost basis. If you sell for crypto, use the GBP value at time of sale. If you sell at a loss, the loss can offset other capital gains.
Minting as a creator: If you create and sell NFTs commercially, HMRC may treat this as trading income rather than capital gains — taxed at income tax rates rather than CGT rates. The distinction depends on the frequency, scale, and commercial intent of your activity. A one-off art piece is different from a series of 10,000 profile picture NFTs.
NFT royalties: Ongoing royalties received each time your NFT is resold are generally taxable as income (not capital gains) at the GBP value when received.
If you have traded significant volumes of NFTs using ETH, your ETH gain calculation from all those purchases is likely substantial and may have been missed entirely. Every ETH spent on an NFT was a disposal of ETH that may have generated a capital gain.
Frequently asked questions
Are NFTs taxed as capital gains or income?
Usually capital gains, for collectors and occasional traders. The gain on sale is the proceeds minus your cost basis (what you paid, in GBP). However, if your NFT activity is frequent and commercially organised, HMRC may treat it as trading income, taxed at income tax rates instead.
Do the HMRC matching rules (same-day, 30-day) apply to NFTs?
No. The Section 104 pooling and matching rules apply to fungible tokens where each unit is identical. NFTs are unique assets — each is matched specifically to its own purchase. There is no pooling and no averaging.
What if I received an NFT as a gift or airdrop?
An NFT received as a gift (other than from a spouse) is usually treated as a disposal by the giver at market value. For the recipient, the cost basis is the GBP value at the time of receipt. An NFT airdrop is generally treated as income at the GBP value when received, which then becomes the cost basis.
Do I need to report NFT gains if I made very small amounts?
The same thresholds apply as other capital gains. If your total gains across all assets are below £3,000 and total proceeds are below £50,000, you have no filing obligation. But keep records — HMRC may ask, and the NFT market can move quickly.
I lost money on NFTs. Can I claim that as a capital loss?
Yes. A loss on an NFT disposal (proceeds less than cost basis) is a capital loss and can be offset against capital gains in the same year or carried forward. You must report the loss on SA108 in the year it arises to preserve it.
Are NFT gas fees deductible?
Gas fees paid when buying or selling an NFT are an allowable cost and can be added to your cost basis (when buying) or deducted from proceeds (when selling). Gas fees paid for other reasons (failed transactions, unrelated transfers) are generally not deductible.
General information only. HMRC's guidance on NFTs is still developing. Consult a qualified adviser.