How to calculate your Bitcoin taxes

  • Automatic Sync
2 min read
First published:
Last updated:
bitcoinAuto Sync with Bitcoin
Photograph of Recap CTO Ben Shepheard; white male, brown hair, glasses.
Ben Shepheard
CTO

Recap’s Bitcoin integration makes it effortless to track, manage, and report on all your Bitcoin transactions—automating your tax compliance. Whether you store your BTC on hardware wallets, software wallets, or multiple addresses, Recap brings everything together with privacy and security at the forefront.

*Disclaimer: The information provided does not constitute tax advice. If you are unsure about any financial or tax-related matters, we strongly recommend seeking guidance from a qualified tax professional.

What is Bitcoin?

Bitcoin is a decentralised digital currency that operates on a peer-to-peer network, allowing users to send and receive value without the need for intermediaries like banks or payment processors. Conceived by an individual or group using the pseudonym Satoshi Nakamoto in 2008 and launched in 2009, Bitcoin pioneered the concept of blockchain technology and serves as the foundation for the broader cryptocurrency ecosystem.

How to automate your Bitcoin crypto taxes with Recap

Navigating Bitcoin tax requirements can feel complicated and time-consuming, but Recap simplifies the entire process. Here’s how you can leverage Recap to automate your Bitcoin tax reporting:

  1. Create or Log in to Your Recap Account
    Sign up for a new Recap account or log in if you already have one. Recap is designed with user privacy and security in mind so your information stays protected.
  2. Add Your Bitcoin Addresses
    In the Recap dashboard, select Add Wallet and choose Bitcoin. Enter your public wallet addresses or extended public keys (xpubs) to allow Recap read-only access to your transaction data.
  3. Sync and Categorise Transactions
    Recap automatically pulls in and categorises your Bitcoin transactions from the blockchain. Recap automatically matches the transfer of Bitcoin between wallets and your exchanges; you can also add notes or recategorise individual transactions to apply the correct tax treatment (e.g., identifying mining income or purchases).
  4. Calculate Taxes Automatically
    Recap calculates cost basis, gains/losses, and potential taxable events by factoring in historical Bitcoin prices at the time of each transaction.
  5. Generate Tax Reports and Filings
    With just a few clicks, produce comprehensive tax summaries or detailed transaction reports. Use these to file your taxes accurately or share them with your accountant.
  6. Stay Compliant Year-Round
    Because Recap syncs your Bitcoin transactions in near real-time, you’re always up to date. Simplify your end-of-year or quarterly filings and avoid last-minute stress.
Note: Recap never requests or stores private keys; all data is sourced directly from the blockchain.
bitcoinAuto Sync with Bitcoin

How are Bitcoin Transactions Taxed?

Tax implications on your Bitcoin transactions vary based on your jurisdiction and how you use Bitcoin. If you’re only storing Bitcoin as a store of value in a hardware or software wallet—without selling, gifting, or trading—you generally won’t trigger any Capital Gains Tax (CGT) or income tax events.

However, if you use Bitcoin as a medium of exchange—for example, buying goods or services or swapping Bitcoin for another cryptocurrency—those transactions may need to be categorised as disposals and could be subject to CGT (or income tax, depending on your jurisdiction).

Below is a quick overview of common Bitcoin transaction types and their usual tax implications:

Transaction typeCGTIncomeTracked in Recap
Transfers between your own wallets
Transfers to and from exchanges
Earning mining rewards
Gifting Bitcoin to a third party
Selling Bitcoin for fiat
Swapping Bitcoin for another crypto (crypto-to-crypto)

For more information on Bitcoin tax rules—or if you’re unsure how to categorise certain transactions—visit our Tax Guides for a more detailed look at crypto tax rules.

Help Guides

Adding a Bitcoin Wallet

How to add your Bitcoin wallets to Recap.

Open guide
What is Bitcoin?

What is Bitcoin? Who made Bitcoin? How does Bitcoin work?.

Open guide
How does Bitcoin work?

What powers Bitcoin? Why does Bitcoin have value? Who controls Bitcoin?.

Open guide

Automate your Bitcoin tax reporting - takes 5 mins.

  • 1

    Sign up to Recap

  • 2

    Set up auto sync with our step by step guide

  • 3

    Generate your tax report ready to self-file or share with your accountant

bitcoinAuto Sync with Bitcoin

FAQs

Is my Bitcoin safe when I connect it to Recap?

Recap only requires read-only access to your public wallet addresses or xpub keys, meaning you alone control your private keys. Because Recap never has access to your private keys, your Bitcoin remains entirely under your custody and out of reach from unauthorised parties.

Can I sync my wallet using xpub or multi-sig xpubs?

Recap supports standard xpub keys for single-sig wallets. While multi-sig xpub support is currently in development, you can still add individual addresses from your multi-sig wallet to Recap. This way, you’ll have visibility of your BTC balances in one place until multi-sig support is fully available.

Are Bitcoin transactions automatically taxed?

Generally, most jurisdictions do not automatically tax Bitcoin transfers between your own wallets. Recap’s default position is that these types of transfers are non-taxable events. When you connect your exchanges via API, Recap automatically detects your Bitcoin transactions, but you may still need to categorise certain transactions (such as gifts or purchases) within Recap to ensure the correct tax treatment is applied. This way, you’ll only pay taxes where necessary and remain compliant with local regulations.

Is Bitcoin Taxable?

Yes, Bitcoin is taxable in most countries, including the UK. The tax treatment depends on how you use or dispose of your Bitcoin. Here are the common scenarios:

  • Selling Bitcoin: If you sell Bitcoin for a profit, you may need to pay Capital Gains Tax (CGT) on the gain.
  • Using Bitcoin to buy goods or services: If your Bitcoin has increased in value since you acquired it, this transaction could also trigger CGT.
  • Trading Bitcoin: Frequent trading could make you liable for Income Tax instead of CGT, depending on whether your activity is considered a business.
  • Receiving Bitcoin as income: If you’re paid in Bitcoin or earn it through mining or staking, it’s usually treated as taxable income, and you’ll need to report it under Income Tax rules.

For more information take a look at our Crypto Tax Guide.

How is Bitcoin capital gains tax calculated in the UK?

To calculate capital gains tax on Bitcoin, HMRC requires you to:

  1. Keep detailed records of every transaction.
  2. Calculate capital gains or losses for each taxable event using the share pooling method.
  3. Report any taxable gains exceeding the annual exemption (£6,000 for the 2023/24 tax year and £3,000 for 2024/25).
Are there any tax-free Bitcoin transactions?

Yes, in many tax juridictions, some Bitcoin activities are not taxable, such as:

  • Buying Bitcoin: Simply purchasing Bitcoin isn’t taxable.
  • Holding Bitcoin: There’s no tax for holding Bitcoin, even if its value rises.
  • Transferring Bitcoin between your wallets: As long as you don’t sell or dispose of it, there’s no tax implication.
What happens if I don’t report Bitcoin taxes?

Failing to report taxable Bitcoin transactions can result in penalties from HMRC or your local tax authority. Many governments are actively cracking down on crypto investors, using data from exchanges and other sources to ensure compliance.

How can I make Bitcoin tax reporting easier?

Using tools like Recap’s Crypto Tax Calculator simplifies tracking and calculating taxes on Bitcoin. It automatically integrates with exchanges and wallets helping you track all transactions, calculate taxable gains and losses and generate reports for tax compliance.

Do HMRC know about my Bitcoin?

Yes. HMRC can access information about your Bitcoin transactions through several channels, including data shared by cryptocurrency exchanges, blockchain analysis, and bank statement reviews. As Bitcoin transactions are recorded on a public ledger, HMRC can trace activity linked to exchanges or other identifiable services. Additionally, you are required to report any taxable crypto activity, and failure to do so could lead to further scrutiny.

Can HMRC track my Bitcoin wallet?

While HMRC doesn’t have direct access to private wallets, they can trace wallet activity on the blockchain. Wallets that are linked to identifiable exchanges or payments are especially easy to track.