Do crypto gains count for the Child Benefit charge? Crypto and adjusted net income in the UK

If you claim Child Benefit and your income is getting close to £60,000, the High Income Child Benefit Charge (HICBC) matters. A common question from parents who hold crypto is whether selling it at a profit could trigger the charge. The answer depends on how HMRC taxes what you received: as a capital gain or as income.

This guide explains how the charge works, what goes into adjusted net income, which crypto counts and which doesn’t, with examples. For the tax rules themselves, see UK crypto tax.

How the charge works

According to GOV.UK:

• You pay back 1% of your Child Benefit for every £200 of adjusted net income over £60,000.
• If your adjusted net income is over £80,000, you pay all of it back.
• If both you and your partner are over the threshold, whoever has the higher income pays the charge.
• You can pay it through PAYE or Self Assessment. You need Self Assessment if you already file a return for other reasons, or if you’re paying after 31 January following the tax year.

What adjusted net income is

GOV.UK describes adjusted net income as your total taxable income before any Personal Allowances, less certain tax reliefs such as trading losses, Gift Aid donations and some pension contributions.

The first step, net income, adds up your taxable income, which GOV.UK lists as:

• pay from employment, and taxable benefits from your job;
• profits from self-employment;
• some state benefits;
• pensions;
• savings interest;
• dividends;
• rental income;
• income from trusts;
• foreign income.

Capital gains aren’t on that list. In the UK, they’re taxed under a separate tax, Capital Gains Tax, with its own rates and annual exempt amount.

Crypto gains: generally outside

HMRC explains that you may need to pay Capital Gains Tax when you sell, swap, spend or give away cryptoassets. A gain worked out that way is a capital gain, not income.

So, for most people who buy crypto as an investment and later sell it, the profit doesn’t go into adjusted net income and doesn’t push them towards the HICBC or the £100,000 Personal Allowance taper. You still have to report and pay any Capital Gains Tax due. See how to report crypto on a Self Assessment return.

There’s an important exception: if HMRC considered your activity to be trading, the profits would be taxed as trading income instead, and trading profits are part of net income. HMRC says that would only happen in exceptional circumstances. See is your crypto activity trading or investing?

Crypto income: inside

Some crypto is taxed as income from the start. According to HMRC:

• From your employer: cryptoassets received as employment income count as money’s worth, so they’re part of your pay.
• From mining, staking or lending: if you receive tokens from mining, staking or lending (including DeFi) and you’re not trading, they’re generally taxable as miscellaneous income.

Income like this is part of your taxable income, so it does count towards adjusted net income. HMRC adds that if you later sell tokens you paid Income Tax on, you work out Capital Gains Tax on any increase in value since you received them. Only that later rise is a capital gain.

For airdrops, which HMRC treats differently depending on whether you did anything to receive them, see crypto airdrops explained.

At a glance

Reporting crypto income

HMRC’s guidance sets out when you need to tell it about crypto income outside employment, such as staking rewards: if it’s more than £2,500 in a year, you need to register for Self Assessment; if it’s between £1,000 and £2,500, you should contact HMRC. Crypto paid through your employer’s payroll is normally dealt with under PAYE; if it wasn’t taxed that way, you report it on a Self Assessment return.

Examples

A gain. Priya earns a salary of £58,000. In the tax year she sells bitcoin at a £20,000 gain. Her adjusted net income stays £58,000, below the threshold, so there’s no HICBC. She deals with the gain through Capital Gains Tax.

Staking income. Tom also earns £58,000, and receives staking rewards worth £4,000 when he gets them. His adjusted net income is £62,000: £2,000 over the threshold. At 1% for every £200, he pays back 10% of the family’s Child Benefit.

Both. Sam earns £70,000 and sells crypto at a £15,000 gain. The gain doesn’t change his adjusted net income, which stays at £70,000, so he pays back 50% of the Child Benefit, the same as without the sale.

Reliefs that reduce adjusted net income

GOV.UK lists deductions that reduce adjusted net income, including Gift Aid donations and certain pension contributions, using their grossed-up amounts. If staking or mining income takes you just over £60,000, it’s worth knowing they exist. Check the GOV.UK guidance for how each one is calculated.

Keep good records

Because the treatment depends on how you received each token, keep records that show:

• what you received as income, the date and its value in pounds;
• what you bought, sold or swapped, with dates, amounts and costs;
• which tokens came from staking, mining or lending, and which from purchases.

HMRC asks for crypto figures in pounds sterling. Good records make it easier to report the income parts on your return and to show that sales were capital gains.

If you’re unsure whether something you received is income or a capital gain, check HMRC’s guidance or ask a tax adviser before you file.