Worried that moving bitcoin between personal wallets or sending crypto to a work wallet will trigger an unexpected HMRC bill? This guide focuses strictly on Transfers Between Wallets: Tax in the UK — clear rules, worked examples (including fees and bridges), payroll implications and precise record templates that stand up to HMRC scrutiny.
The sections below provide immediate answers for common transfer scenarios, then step-by-step payroll and reporting instructions for employers and employees. All guidance references HMRC practice and practical evidence accepted for proving ownership.
Key takeaways: what to know in 1 minute
- Transfers between wallets owned by the same person are generally not disposals for Capital Gains Tax (CGT), so no immediate CGT charge arises when moving assets between personal non-custodial wallets.
- Network fees (gas) and token swaps can create taxable events: fees paid in crypto or sent to a third party may be treated as disposals or taxable income depending on context.
- Cross-chain bridges and swaps can be disposals if they result in the exchange of one cryptoasset for another — treat bridge transactions and token conversions with caution.
- Employer crypto payments (salary or benefits) attract PAYE and NICs on the value of the crypto when it is received; the value must be calculated in GBP at the time of receipt for payroll reporting.
- Keep complete, timestamped records (transaction IDs, signed messages, explorer snapshots, GBP valuations, rationale for ownership) to meet HMRC requirements.
How PAYE applies to crypto benefits in the UK: transfers and payroll context
When crypto is given to an employee — whether by direct payment, as a benefit in kind, or through employer-controlled wallets — HMRC treats the value received as earnings and subject to PAYE and employer National Insurance contributions (NICs) at the time the employee has access to or control of the crypto.
- If an employer transfers bitcoin to an employee's personal wallet: PAYE applies on the GBP value at the time of transfer. The employer must operate PAYE and report on Real Time Information (RTI).
- If the transfer is between an employee's own personal wallets (no employer involvement): no PAYE applies, but CGT rules may be relevant on later disposals.
For official HMRC commentary, see the published guidance on cryptoassets: HMRC: Tax on cryptoassets.
When a wallet-to-wallet transfer can count as a benefit
- Transfers from an employer-controlled or custodial employer wallet to an employee’s wallet create a taxable employment benefit. Employers must report and withhold PAYE and account for NICs.
- Transfers that simply change custody within the employer’s systems (internal ledger movement) may still require reporting if the employee gains an economic interest.
Valuing bitcoin and other crypto for payroll reporting: practical rules and examples
Valuation rules focus on the market value in GBP at the time the employee receives the asset. Use a reliable, time-stamped exchange rate or price feed and record the source.
Example 1 — direct bitcoin salary payment:
- Employee receives 0.05 BTC at 2026-01-10 12:34 UTC.
- Spot price at that timestamp: £35,000 per BTC (source: reputable exchange snapshot).
- GBP value for PAYE and NICs: 0.05 × £35,000 = £1,750.
Example 2 — payment net of network fee paid in BTC:
- Employer sends 0.050 BTC but 0.0005 BTC is taken as a network fee (paid to miners), so employee receives 0.0495 BTC.
- HMRC focus: value of benefit is the value received by the employee (0.0495 × spot GBP rate), but the fee paid to a third party by the employer may be treated as a taxable expense or benefit depending on arrangement — document clearly.
Practical valuation checklist:
- Capture timestamp (UTC) and source (exchange API snapshot or reputable data provider).
- Convert at the spot GBP rate at the moment of receipt.
- For salary paid in tokens without a liquid GBP market, convert via a quoted USD/EUR cross-rate using a recognised exchange and document steps taken.
Employer obligations: PAYE, National Insurance and HMRC reporting for crypto transfers
Employers must treat crypto salary or benefits as either cash equivalents or benefits in kind depending on transfer characteristics. Obligations include:
- Operate PAYE and deduct income tax and employee NICs where crypto constitutes earnings.
- Account for employer NICs on the cash-equivalent value.
- Report payments on RTI (Full Payment Submission) with explanatory notes where necessary.
- Provide a payslip that shows the GBP value of the crypto component and tax/NICs withheld.
- Maintain supporting records for 6 years in line with HMRC record-keeping rules.
Required employer records (minimum):
- Employee identity and HMRC payroll identifiers.
- Date/time of crypto transfer and transaction hash.
- GBP valuation methodology and source.
- Evidence of transfer (wallet addresses under employer control, transaction explorer links with timestamps).
Example payroll entry (how to present on payslip)
- Gross pay (GBP): £2,500
- Crypto salary (GBP equivalent): £1,750 (0.05 BTC at £35,000)
- Taxable pay: £4,250
- Tax and NICs deducted: shown as normal
Employers may wish to use payroll software that supports custom pay elements and can attach explanatory notes and transaction IDs.
Employee tax treatment: income tax versus capital gains in transfer scenarios
Distinguish two moments:
1. When crypto is received as salary/benefit: income tax and NICs apply on the GBP market value at receipt.
2. When crypto is subsequently disposed of (sold, exchanged, spent): Capital Gains Tax (CGT) may apply on any gain since the base cost (the amount taxed as income or the acquisition cost if purchased).
Key points specific to transfers between wallets:
- Transfer between wallets owned by the same individual is not a disposal and therefore does not create a CGT event — unless the transfer involves a third party, a swap, or a fee that disposes of an amount.
- If the transfer involves converting one cryptoasset to another (swap or certain bridges), HMRC treats this as a disposal of the original asset and an acquisition of the new asset; CGT rules apply.
Worked numeric example (income then CGT):
- Employer pays 0.05 BTC as salary (value £1,750 taxed as income).
- Employee later sells 0.05 BTC for £2,500. Acquisition cost for CGT equals the GBP value taxed as income (£1,750). Gain = £750 subject to CGT allowances and rates when sold.
Record-keeping, payslips and payroll software for crypto: templates and acceptable proofs
HMRC expects the same level of record quality for crypto as for traditional assets. Essential records:
- Transaction hashes and blockchain explorer links (with timestamps).
- Wallet addresses involved (labelled as employer/personal/custodial).
- GBP valuation evidence (screenshot/API CSV/price feed records).
- Signed messages or exportable wallet proofs where ownership may be queried.
Acceptable ownership proof examples:
- A signed message produced by the wallet proving control of an address at a timestamp.
- A blockchain explorer snapshot showing a transaction with the wallet address and timestamp.
- Employer system ledger export (for custodial wallets) showing assignment of asset to employee with timestamp.
Template guidance (CSV fields recommended for imports into tax software):
- Date (UTC), Time (UTC), Transaction hash, From address, To address, Asset, Quantity, Network fee (asset), GBP value at timestamp, Valuation source URL, Notes
Payroll software considerations:
- Use pay elements labelled clearly (e.g. "crypto salary - BTC") so PAYE calculations can be traced.
- Attach transaction hash and valuation reference to the employee's payslip or payroll record using the software’s notes field.
- If software integration is not available, record on RTI with manual justification and retain supporting documents.
Practical steps to report crypto salary and benefits: step-by-step howto
- Determine whether the transfer is an employment payment or personal transfer.
- If employment-related, obtain GBP valuation at the time of transfer using a reputable source and timestamp the evidence.
- Operate PAYE and deduct tax/NICs at payroll, record on RTI with explanatory note; include the GBP value on the payslip.
- Account for employer NICs and include them in employer submissions and accounts.
- Keep full records for 6 years and supply employees with documentation showing GBP valuation and transaction hash.
How to decide whether a transfer between wallets is taxable (flow)
- Is the transfer from employer to employee or employer-controlled wallet? → Yes: treat as taxable employment benefit.
- Is the transfer between wallets owned by the same individual with no third-party involvement? → Generally not taxable as a disposal.
- Does the transfer involve converting assets (swap) or bridge with token exchange? → Likely a disposal; treat as CGT event and record acquisition cost for the new asset.
Transfer decision process (visual guide)
Transfer decision flow: tax treatment
1️⃣
Employer → employee?
PAYE & NICs on GBP value
2️⃣
Same person wallets?
No disposal; keep records
3️⃣
Swap or bridge performed?
Treat as disposal → CGT
✅
Record & value
Timestamp, tx hash, GBP price source
Advantages, risks and common errors when handling transfers between wallets: tax impact
✅ Benefits / when transfers are safe
- Keeping private transfers between personal wallets avoids immediate CGT and simplifies record-keeping when no swap occurs.
- Moving crypto to a hardware wallet preserves ownership proof and can be backed by signed messages.
- Employers using clear valuation and payroll processes reduce compliance risk.
⚠️ Errors to avoid / risks
- Treating cross-chain bridges or token swaps as simple transfers — these can be disposals.
- Failing to capture time-stamped GBP valuations when payroll crypto is paid — leads to HMRC queries and re-calculations.
- Not recording transaction hashes or wallet ownership proof — weak evidence increases audit risk.
Comparative quick reference: custodial vs non-custodial transfers and tax outcome
| Scenario |
Typical tax outcome |
Record required |
| Personal wallet → personal wallet (same owner) |
No disposal; no CGT |
Transaction hash, timestamp, wallet labels |
| Custodial exchange wallet → personal wallet (same account owner) |
Generally no disposal if same beneficial owner, but check exchange ledger |
Exchange export, tx hash, timestamp |
| Employer custodial wallet → employee wallet |
PAYE & NICs on GBP value |
RTI, payslip entry, valuation evidence |
| Swap (BTC → ETH) via DEX or bridge |
Disposal (CGT) at time of swap |
Transaction hash, GBP value at swap, new asset cost basis |
FAQ: frequently asked questions
Is a transfer between personal wallets taxable?
A transfer between wallets owned by the same person is generally not a disposal for CGT, so no immediate tax arises. Keep records to show ownership and intent.
Do network fees create a taxable event?
Network fees paid in crypto can reduce the quantity received; if fees are paid to a third party they may be treated as disposals of that crypto. Document fees separately.
Does using a cross-chain bridge count as a disposal?
Often yes: when a token is converted or wrapped across chains, HMRC may view it as a disposal of the original asset and acquisition of a new one — treat as CGT.
How should employers value crypto paid as salary?
Use a reliable GBP spot price at the exact time the employee receives the asset; retain a timestamped evidence source (exchange API or reputable price feed).
What proof of wallet ownership does HMRC accept?
Signed messages, blockchain explorer snapshots, and employer ledger exports are practical proofs. Ensure timestamps and transaction hashes are included.
What if a private key is lost after a transfer?
Loss of access does not extinguish a tax event. If a disposal or loss occurs, document attempts to recover access; CGT treatment for losses is narrow and requires evidence.
Can payroll software handle crypto elements?
Many payroll systems allow custom pay items and attachments; if not, maintain manual RTI submissions with supporting documents and retain them for 6 years.
Your next step:
- Gather transaction hashes and produce a CSV with Date, Time, Tx hash, From, To, Asset, Quantity, GBP value, valuation source.
- For employer payments, add the GBP crypto value to payroll and operate PAYE/NI; attach transaction evidence to the employee record.
- If unsure whether a transfer is a disposal (bridge/swap), treat it as a disposal for record purposes and consult a specialist.