UK Tax on Staking Rewards
If you've been earning staking rewards from your cryptoassets in the UK, you may be wondering about the tax treatment. The short answer is that HM Revenue and Customs (HMRC) treats staking rewards as taxable income at the time of receipt, with a separate calculation when you later dispose of those same tokens.
Staking rewards: the core HMRC rule
For most UK taxpayers, HMRC guidance is clear - staking rewards count as other taxable income, based on the sterling value at the time they are received. Non-trading individuals must report and pay income tax on the value of any cryptocurrency received as a staking reward.
Even where staking happens automatically on a platform or via smart contracts, the receipt of tokens counts as income at the time of receipt. There is no deferral pending later disposal.
The general rules are that the staking reward is taxable income when it is effectively received, which is usually when it arrives in a wallet, at the conversion rate to £ at that time.
For non-trading individuals, the amount is added to other income in accordance with the normal rules, with allowances and expenses as appropriate. If later disposable, that is a capital asset, with the reward value as the “cost price” on later disposal.
If the staking happens as part of a trade, different rules apply, but this guidance applies to private individuals.
Where DeFi fits
Staking is not the only kind of reward you might receive from engaging in decentralized finance (DeFi) protocols. HMRC’s guidance also covers returns from peer to peer lending of cryptoassets, liquidity provision (including staking to liquidity pools), yield farming, and quite other methods of earning in the DeFi space.
Wherever income is calculated as a percentage of lent, staked or provided cryptoassets, this generally creates a taxable return. Delegating staking, lending, or providing liquidity through a third party or a smart contract does not exempt income. If it is income in nature, as distinct from principal, it is taxed as income when received.
This same principle applies to staking, with staking rewards taxed as other income. Where staking is an income-like return, it is treated as other income.
In summary
So to be clear, the first step for an unstaked person in the UK is to identify the sterling value of staked rewards at the time they were received and declared as that kind of income. If not yet disposed of, count the receipt value for capital purposes (including any relief).
This doesn't cover taxes on staked crypto by businesses who stake for income, or who might do so all year.
General information, not financial, investment or tax advice. Rules, fees and allowances change: check the figure with HMRC, the FCA or the service itself before you act.
