Airdrops — free tokens distributed to wallet addresses — are taxable events in the UK. The tax treatment depends on the type of airdrop.
Types of Airdrops
| Type | How It Works |
|---|---|
| Token distribution | Free tokens sent to existing holders |
| Forced airdrop | Tokens appear in your wallet without action |
| Claim-based airdrop | You must claim the tokens |
| Task-based airdrop | Complete tasks to earn tokens |
| Holder airdrop | Based on holding a specific asset |
Tax Treatment by Type
| Airdrop Type | Tax Treatment |
|---|---|
| Token distribution (no action needed) | No tax until you sell |
| Claim-based airdrop | Income tax at market value when claimed |
| Task-based airdrop | Income tax (trading or miscellaneous) |
| Holder airdrop (no action) | No tax until disposal |
| Referral airdrop | Income tax |
The key distinction: if you had to do something to receive it (claim, task, referral), it’s income. If it just appeared in your wallet, it’s not income — but CGT applies on sale.
Income vs CGT
| Scenario | Tax |
|---|---|
| Token appears in your wallet with no action | No income — CGT on disposal |
| You claim an airdrop | Miscellaneous income at claim value |
| You complete tasks for an airdrop | Trading or miscellaneous income |
| Airdrop for holding a governance token | No income — CGT on disposal |
| Airdrop for providing liquidity | Miscellaneous income |
What Counts as “No Action”
| Action | Is It Action? |
|---|---|
| Snapshot of holders | No |
| Claim tokens on a website | Yes |
| Hold a specific NFT | No |
| Complete social tasks | Yes |
| Provide liquidity | Yes |
| Vote on governance | Usually no |
Valuation at Receipt
| Timing | Value |
|---|---|
| Claim-based airdrop | Market value when you claim |
| Task-based airdrop | Market value when received |
| No-action airdrop | No income event |
For income: use the GBP value of the tokens at the moment you receive or claim them.
Disposal of Airdropped Tokens
| Cost Basis | Amount |
|---|---|
| Income airdrop | Market value when taxed as income |
| No-action airdrop | Zero (or market value when received) |
For no-action airdrops, the full sale proceeds are a gain (cost basis = £0).
Allowance Check
| Income Type | Allowance |
|---|---|
| Airdrop income (miscellaneous) | £1,000 trading allowance |
| Airdrop income (trading) | £1,000 trading allowance |
| CGT on airdrop sale | £3,000 CGT allowance |
Record Keeping for Airdrops
| Record | Why |
|---|---|
| Date received | Income timing |
| Market value at receipt | Income or cost basis |
| Airdrop type | Income vs CGT treatment |
| Transaction hash | Proof of receipt |
| Actions taken | Claim, task, or no action |
| Disposal date and value | Gain calculation |
Bottom Line
Airdrops that require action (claiming, tasks, referrals) are taxable as income when received. Airdrops that appear without action are not income — but CGT applies when you sell, with a cost basis of zero. The £1,000 trading allowance may cover small airdrop income. Track every airdrop with date, value, and type. HMRC expects accurate reporting of all crypto income.
Planning Ahead for Airdrop Tax
The distinction between income and capital gains for airdrops has real consequences for your tax bill. If you are an active DeFi user who regularly receives airdrops, the income tax treatment can be significantly more expensive than CGT — particularly if your marginal income tax rate is 40% or 45%, compared to the CGT rates of 18% or 24%.
One practical approach is to keep a running log of every airdrop you receive throughout the year. Note the date, the token, the GBP value at that moment, whether you took any action, and the transaction hash. When the self-assessment deadline arrives, this log makes the difference between a straightforward return and a frantic weekend of blockchain archaeology.
It is also worth noting that HMRC has become increasingly sophisticated in its ability to trace on-chain transactions. The days of assuming crypto income is invisible to the taxman are long gone. If you have received airdrops — whether you think they are taxable or not — keeping records protects you if HMRC queries your return.