.png)
HMRC Targeting NFT Traders: Are Your Crypto Art Profits Tax-Free?
- Daniel Cattrall
- Jul 9
- 3 min read
As NFT trading matures, HMRC is increasing scrutiny on investors who have made profits from buying and selling digital art. If you’ve earned income from NFTs but haven’t declared it, you could be at risk of investigation — and significant penalties.
At Tax Dispute Experts, we’re seeing a rise in enquiries related to undeclared NFT gains. Whether you're a casual collector or a full-time NFT flipper, now is the time to review your tax position.
What Are NFTs — and Why Does HMRC Care?
NFTs (Non-Fungible Tokens) are unique digital assets, typically stored on blockchains like Ethereum. They represent ownership of digital artwork, collectibles, gaming items, and more. NFTs can be traded for profit on marketplaces such as OpenSea, Blur, and Magic Eden.
HMRC classifies most NFT activity as a form of cryptoasset transaction, which means profits are generally subject to Capital Gains Tax (CGT) — and in some cases Income Tax, depending on the nature of the activity.
Is NFT Trading Taxable in the UK?
Yes. Just like with other cryptoassets, NFT transactions are taxable. The tax treatment depends on intent, volume, and how the NFT was acquired.
Capital Gains Tax (CGT) applies when:
You buy an NFT and later sell it at a profit
You trade one NFT for another (a disposal event)
You convert NFT sale proceeds back into crypto or fiat
Income Tax may apply if:
You are “flipping” NFTs regularly with an intention to make a profit (trading activity)
You create and sell NFTs as a digital artist
You receive NFTs as payment for services or work
Example:
You bought a Bored Ape NFT for 2 ETH and sold it months later for 8 ETH. That gain is subject to CGT. But if you're minting dozens of NFTs and selling them weekly, HMRC may classify this as a trade, and you may be liable for Income Tax and National Insurance.
Are Airdropped NFTs Taxable?
Yes. If you received an NFT as part of a promotion or reward — for example, through an airdrop — it may be taxed as income at the time of receipt, based on its fair market value. When you later sell it, CGT will apply on any increase in value.
What Records Should You Keep for NFT Transactions?
Good record-keeping is crucial. HMRC requires you to maintain records for at least 5 years after the tax year in which you file.
You should retain:
Dates of acquisition and disposal
Purchase and sale prices (including associated ETH gas fees)
Wallet addresses used
Marketplace platform data (e.g. OpenSea transaction logs)
Screenshots or contract hashes if NFTs were received off-market
What If You Didn’t Declare NFT Gains?
You can still make a voluntary disclosure through HMRC’s Digital Disclosure Service (DDS). Doing so before HMRC contacts you can significantly reduce penalties and interest.
Steps you should take:
Identify all taxable NFT events
Calculate gains or income
Submit a voluntary disclosure with the help of a specialist like Tax Dispute Experts
Arrange payment or a Time to Pay agreement if needed
Important: If HMRC opens an enquiry before you disclose, penalties can rise to 100% of the tax due — or more if they allege deliberate behaviour.
How Tax Dispute Experts Can Help
We provide specialist tax investigation support for NFT investors, collectors, artists, and traders. Our services include:
Reviewing your NFT transaction history
Determining whether your activity is subject to CGT or Income Tax
Preparing voluntary disclosures to HMRC
Negotiating payment plans and minimising penalties
Supporting you during an ongoing HMRC investigation or compliance check
Don’t Wait for an HMRC Letter
If you’ve made NFT profits and haven’t disclosed them, take proactive steps today. HMRC’s tools for tracking crypto and NFT activity are improving every year — and their focus on digital assets is only growing.
Contact Tax Dispute Experts for a confidential consultation. We’ll help you correct your tax position before HMRC comes knocking.
