Are startups certain their crypto activity sits within HMRC rules — especially when pensions or SIPP arrangements are involved? Misclassification or weak record-keeping can create significant tax, regulatory and trustee risks for both founders and early-stage companies.
This guide provides a clear, actionable roadmap for Startup Crypto Tax Compliance focused on pension exposure: how HMRC treats Bitcoin in UK pensions, consequences for SIPPs holding crypto-assets, the capital gains and income tax picture, trustee duties and regulatory risks, valuation and record-keeping requirements, and immediate steps to limit pension crypto exposure.
Key takeaways: what to know in one minute
- HMRC treats crypto as property, not currency, so holding Bitcoin in pension wrappers is subject to pension rules and potential tax traps. Startups must not assume crypto is automatically permissible in pensions.
- SIPPs can hold crypto only via approved structures; direct custody in many retail SIPPs is rare and may breach scheme rules. Check plan documentation and trustee policies.
- Gains in pension wrappers may be exempt from CGT but still attract tax on distributions; the commercial reality depends on whether holdings are inside a registered scheme. Understand the distinction between scheme-held and personal holdings.
- Trustees have a duty to manage risk, liquidity and valuation; failure to follow due diligence can trigger regulatory action from The Pensions Regulator and tax enquiries from HMRC. Document decisions and professional advice.
- Immediate pragmatic steps reduce exposure: restrict pension crypto allocations, centralise records, adopt market-value valuation policies and follow a clear disposal policy. Actions today reduce HMRC and trustee risk tomorrow.
How HMRC treats Bitcoin in UK pensions
HMRC classifies cryptoassets as property for tax purposes rather than legal currency. This classification matters for pensions because registered pension schemes (including SIPPs) must comply with rules that restrict the types of assets permitted and require proper valuation and reporting.
- For taxation HMRC guidance is available in the Cryptoassets Manual: HMRC Cryptoassets Manual. That manual clarifies that disposals of crypto are chargeable events and must be considered in the context of the ownership vehicle.
- If crypto is held within a registered pension scheme there is generally no capital gains tax (CGT) on disposal inside the scheme. However, the pension rules and tax reliefs apply only if scheme rules and registration requirements are met.
- Where employees or founders transfer crypto into a pension personally (outside a registered scheme), HMRC treats such transfers as disposals for CGT and may trigger immediate tax consequences.
Startups should treat HMRC classification as the baseline: the commercial desirability of holding Bitcoin in a pension must be balanced against pension law, trustee governance and practical custody issues.
Tax consequences for SIPPs holding crypto-assets
SIPP providers and trustees must confirm whether their scheme rules permit cryptoassets. Many mainstream SIPP providers restrict exotic assets; specialist SIPPs may permit certain crypto investments via approved structures.
Key tax and compliance consequences for SIPPs:
- Registered scheme status: If a SIPP legitimately holds crypto within a registered scheme vehicle, disposals inside the SIPP do not create CGT liabilities for the member. Registration and scheme compliance are essential.
- Income tax on distributions: Pension benefits taken later (taxable lump sums or income) are subject to normal income tax rules on withdrawal, irrespective of the asset type that generated the value inside the SIPP.
- Employer contributions and benefit-in-kind: If a startup makes employer pension contributions in crypto or arranges with employees to use crypto to fund pensions, there are PAYE, NICs and employer-reporting implications. Such arrangements are complex and usually impractical without converting crypto to fiat before contribution.
- Member-level disposals: If an individual withdraws crypto from the pension wrapper (for example, via an unauthorised payment), the event can create punitive tax charges and reporting obligations.
Where uncertainty exists, trustees should seek legal and tax advice and follow guidance from The Pensions Regulator: The Pensions Regulator.
Example: SIPP holds Bitcoin via a pooled fund
A SIPP invests in a regulated pooled fund that holds Bitcoin. The SIPP investor benefits from any appreciation inside the scheme without immediate CGT. However, the fund must be permissible under scheme rules and meet the liquidity and valuation obligations set by trustees and the regulator.
Capital gains and income tax on pension crypto
The tax profile depends on whether crypto is inside a registered pension scheme or outside it.
- Inside a registered scheme: disposals within the registered pension are generally outside the scope of CGT. Taxation arises on payment of benefits under normal pension rules (income tax on withdrawals). This can make a registered SIPP an effective shelter for crypto gains — but only if the holding is genuinely within the registered scheme.
- Outside a registered scheme: transferring crypto into a pension without proper structuring is likely a disposal for CGT at the time of transfer. The disposal must be reported on self-assessment and gains taxed at the individual’s applicable CGT rate.
- Staking and income-like events: rewards that are income in nature may be treated as taxable income rather than capital gains. For pension-held assets, the classification should follow scheme accounting and whether rewards accrue to the scheme or the individual.
Tax rates and allowances (as at 2026) are subject to change. Detailed HMRC guidance and confirmation from a tax specialist are recommended for anything other than straightforward cases.
Trustee duties and regulatory risks with crypto
Trustees have statutory duties: to act in the best interests of members, ensure assets are suitable, maintain adequate diversification and liquidity, and to act prudently. Crypto introduces practical challenges for each duty.
- Duty of prudence: Crypto volatility can breach a trustee’s duty to invest prudently. Trustees must document risk assessments and why any crypto exposure is consistent with member interests.
- Custody and safekeeping: Many trustees are not set up to custody private keys. Outsourcing to regulated custodians or holding exposure via regulated funds is commonly required.
- Liquidity and ability to pay benefits: Illiquid or fractionalised holdings may impede payment of benefits. Trustees must consider disposal pathways and timing.
- Regulatory enforcement: The Pensions Regulator will scrutinise governance failures, and HMRC may open inquiries if tax reporting is weak or unauthorised payments occur.
Trustees should maintain written policies, undertake regular reviews and seek independent professional advice. Reference: HMRC and The Pensions Regulator guidance pages.
Valuation, reporting and record-keeping for crypto
Accurate valuation and robust records are the backbone of compliance. HMRC expects market-value valuations for tax events and clear audit trails.
Essentials:
- Valuation policy: Adopt a documented market-value policy that defines reference exchanges, time-stamps and handling of illiquid tokens. For Bitcoin, a widely used approach is to use a reliable exchange midpoint at a specific UTC timestamp.
- Reporting: Disposals by individuals must be reported on self-assessment (Capital Gains). Scheme-level reporting must be reflected in trustee accounts and annual scheme returns where relevant.
- Record-keeping: Maintain records of dates, values (in GBP), counterparty, wallets/exchanges, provenance and transfer routing. HMRC typically requires records for tax calculations for a minimum period (usually 6 years).
- Reconciliation: Reconcile on-chain records with exchange statements and custodian reports. Use automated tools where possible to avoid manual errors.
| Area |
Practical requirement |
Why it matters |
| Valuation method |
Define exchange sources, time and conversion rule |
Ensures consistency for tax events |
| Transaction ledger |
Exportable, timestamped records (CSV/CSVX) |
HMRC audit trail and reconciliations |
| Custody proof |
Custodian statements and SLA evidence |
Demonstrates control and mitigates trustee risk |
| Accounting entries |
Clear GL codes for buys, sells, income |
Interfaces with company accounts and payroll |
Alternating-row guidance: ensure a consistent policy across reporting periods to defend positions in an HMRC enquiry.
Practical checklist for valuations
- Specify primary exchange(s) and fallbacks.
- Use the same timestamp convention across the organisation.
- Convert to GBP using HMRC-accepted rates or consistent market rates.
- Retain snapshots of exchange prices and proof of conversion.
Pension crypto risk checklist
✓
Confirm scheme rules
Written authorisation for crypto holdings
⚠
Assess liquidity
Ensure disposals can meet benefit payments
📊
Document valuation policy
Exchange sources and timestamp rules
🔐
Verify custody
Use regulated custodians where possible
Practical steps to limit pension crypto exposure
Startups can reduce risk quickly with clear governance and operational controls. The following steps are practical and designed for immediate implementation:
- Restrict exposure: Cap pension crypto allocation to a small, pre-defined percentage of scheme assets (for example, single-digit exposure). This protects members from concentrated volatility.
- Use regulated intermediaries: Route any pension crypto exposure through regulated funds or custodians rather than direct private key custody by trustees or members.
- Update scheme documentation: Amend SIPP terms to explicitly permit or prohibit crypto. Ensure trustees record approvals and risk assessments.
- Centralise record-keeping: Implement a single ledger for all crypto-related pension transactions with snapshots, exchange proofs and custodian confirmations.
- Create a disposal policy: Define when and how to liquidate crypto to meet pension liabilities, including triggers for market stress.
- Seek formal advice and minute decisions: Trustees should obtain written legal, tax and custody advice and document decisions in meeting minutes.
These steps reduce the risk of HMRC reclassification, unauthorised payments and regulatory censure.
Advantages, risks and common errors
✅ Benefits / when to apply
- Potential tax-efficient accumulation if crypto is legitimately held inside registered pension wrappers.
- Pension-held gains can be sheltered from CGT until benefits are taken.
- For founders, using pensions to hold long-term crypto assets can align retirement planning with asset strategy if governance is robust.
⚠️ Errors to avoid / risks
- Assuming every SIPP can hold crypto: many providers prohibit direct holdings.
- Weak valuation or missing records: creates a high probability of HMRC enquiries and tax adjustments.
- Inadequate custody: trustees holding private keys or relying on unregulated custodians increases fiduciary risk.
- Treating staking rewards or airdrops as non-taxable: these can be taxable as income or capital depending on circumstances.
Questions frequently asked
Can a SIPP hold Bitcoin directly?
Most mainstream SIPPs do not permit direct private-key custody. Specialist SIPPs or funds may provide exposure via regulated vehicles; trustees must confirm scheme rules and document approvals.
What happens if an individual transfers crypto into a pension without structure?
Such a transfer is likely a disposal triggering CGT and must be reported on self-assessment. Unauthorised payments from a pension can also create tax charges.
How should Bitcoin be valued for pension accounts?
Use a documented market-value policy: specify reference exchanges, timestamp convention (UTC), conversion to GBP and fallback pricing methodology.
Are staking rewards inside a SIPP taxed differently?
Classification depends on whether rewards accrue to the scheme or the individual and whether they are income-like. Treat rewards with caution and seek specialist tax advice.
What records should a startup keep for pension crypto?
Transaction dates, counterparty, wallet addresses, exchange statements, GBP valuations, custodian statements and trustee minutes. HMRC expects a clear audit trail for at least six years.
Can employer pension contributions be made in crypto?
Practically this is complex and uncommon. Employer contributions are usually made in fiat to avoid PAYE/NIC and valuation issues.
Your next step:
- Review scheme documentation and trustee minutes to confirm whether crypto holdings are permitted and documented.
- Implement a market-value valuation policy and centralised transaction ledger covering all pension-related crypto activity.
- Seek formal tax and legal advice and obtain written minutes for trustee decisions before any new crypto exposure.