Disclaimer: This article is intended as an informative piece. This is not accounting or tax advice. Please speak to a qualified tax professional about your specific circumstances before acting upon any of the information in this article.

Crypto staking is a popular way for investors to earn passive income but it comes with complicated tax implications that depend on the mechanisms of the DeFi protocol. You need to consider if the nature of the rewards is capital or income.

If staking rewards are deemed as income in nature, miscellaneous income is applicable, or trading income where the taxpayer is classed as a financial trader.

Alternatively, if the staking reward is determined capital in nature, a capital gain is realised on the reward at the time of entering the staking position. The amount of capital gain is the estimated present value of the future capital reward.

Discovering what tax to apply to staking rewards is complex - take a look at our article "How is crypto staking taxed in the UK?" for more information. We highly recommend speaking to your accountant about the best way to report any gains or losses.
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