Non-fungible tokens raise no genuinely new tax principles, but they apply the existing rules in ways that often surprise holders. HMRC has confirmed that NFTs are chargeable assets for CGT purposes, with disposals taxable in the usual way. The complications come from the structure of NFT transactions: minting, royalties, marketplace fees and the fact that each NFT is, by design, a separate asset.
NFTs are not pooled
The Section 104 pool applies to identical tokens. NFTs are by definition non-identical, so each NFT is its own asset with its own cost basis. There is no pooling across an NFT collection, even if the holder owns many tokens from the same project. The same-day and 30-day rules are also less relevant in practice because identical tokens are rarely involved.
Buyers and collectors
For an individual buying NFTs as an investment, the analysis is straightforward in principle: cost basis is the sterling-equivalent purchase price plus allowable acquisition costs (marketplace fees, gas), proceeds are the sterling-equivalent sale price less disposal costs. The gain or loss is brought into the CGT computation alongside any other crypto disposals.
Crypto-funded purchases are also a disposal of the crypto used. Buying a 5 ETH NFT triggers two events: a disposal of 5 ETH for CGT purposes (with the usual pooling) and an acquisition of the NFT at its sterling value on the day. Selling that NFT later for 8 ETH is a disposal of the NFT and an acquisition of 8 ETH at the sterling value on the day.
Creators and minters
An artist or creator minting and selling NFTs is typically generating trading income or, where the activity is small-scale and occasional, miscellaneous income. The receipts are taxable as income, not as capital. Allowable expenses include minting costs, platform fees, marketing and a proportion of relevant business overheads where the activity is structured as a trade.
Where the creator retains a royalty interest entitling them to a share of secondary sales, the royalties are taxable as income on receipt, valued in sterling at the date of receipt. Smart contract royalties often arrive directly in crypto, which means the royalty receipt is also the acquisition of that crypto for CGT purposes on future disposal.
Royalties and the UK creator
For UK-resident NFT creators, the income tax treatment of royalties is the same regardless of where the buyer is located. Receipts in stablecoins or fiat are taxed in sterling. Receipts in volatile cryptoassets carry an embedded CGT exposure between the date of receipt (when income tax is charged on the sterling value) and the date of eventual disposal.
Marketplace fees and gas
Gas fees and marketplace commissions paid on acquisition can be added to the cost basis of the NFT. Fees paid on disposal can be deducted from proceeds. Where fees are paid in a cryptoasset, that fee payment is itself a small disposal of the crypto used, again at the sterling value at the time.
Worthless NFTs
A common question from clients is what to do with NFTs whose value has collapsed to effectively zero. HMRC allows a negligible value claim where an asset has become of negligible value during ownership; this triggers a deemed disposal at the value claimed (usually nil) and an acquisition at the same value, crystallising the capital loss. The asset must genuinely be of negligible value at the date of the claim, supported by evidence such as a defunct marketplace, dead collection or absence of any active market.
Charitable gifts and gifts to others
Gifts of NFTs to anyone other than a spouse or civil partner are disposals at market value for CGT. Gifts to UK-registered charities can attract gift aid relief in some cases, but the NFT-specific mechanics require care. The market value at the date of the gift is the proceeds figure for the CGT computation.
Inheritance tax
NFTs sit in the holder's estate at market value at the date of death and are subject to inheritance tax in the usual way. Practical challenges arise around access to wallets and proving ownership; estate planning for crypto and NFT holders increasingly includes documented access arrangements alongside the will.
How we help
PushDigits prepares CGT and income tax computations for NFT collectors and creators. We work through marketplace exports, identify the relevant disposal events, value transactions in sterling and integrate the result into your annual return. See our tax planning and Self Assessment pages, or contact us for a discussion.