Polymarket Tax in the UK: Betting, Capital Gains or Trading Income?

UK Polymarket tax has no settled answer because HMRC has never said how prediction-market positions are taxed. There are three readings. One is that a position is a bet, and betting winnings are outside both Income Tax and Capital Gains Tax. Another is that the USDC and outcome tokens are cryptoassets, so each disposal falls under Capital Gains Tax. The third, which only applies in exceptional cases, is that you are running a trade and your profits are subject to Income Tax. The reading you rely on decides whether your losses count, so it is worth understanding all three.

OddsFile is software, not tax advice. HMRC has not published guidance on prediction markets or outcome tokens. This article explains the possible treatments and the sources behind them; a UK tax adviser can tell you which position fits your circumstances.

First, a practical point: Polymarket is close-only in the UK

Polymarket's own geoblocking documentation lists the United Kingdom as close-only, on the website and through the API. UK users can close existing positions but cannot open new ones. If you traded while UK-resident, though, you may still have gains or losses to work out for 2024/25 and 2025/26, plus whatever you do when you close positions now.

The three possible treatments

1. Betting: no tax, but no losses either

UK betting winnings are generally tax-free. GOV.UK's Income Tax overview lists National Lottery wins as tax-free. HMRC's Business Income Manual at BIM22015 states that "betting and gambling, as such, do not constitute trading." For Capital Gains Tax, section 51 of the Taxation of Chargeable Gains Act 1992 says winnings from betting, lotteries or games with prizes are not chargeable gains.

The cost is symmetry: if winnings are outside the tax net, so are betting losses. You can't claim them.

The open question is whether a Polymarket position is a "bet" at all. Polymarket describes its markets as trading in tokenised outcome shares. Positions are bought and sold before resolution at prices that move, and everything settles in a stablecoin. Nobody has tested this.

2. Cryptoassets: Capital Gains Tax on each disposal

HMRC's view is that most individuals hold cryptoassets as personal investments, so Capital Gains Tax applies when they dispose of them. The Cryptoassets Manual treats selling a token, swapping one token for another, and using a token to pay for something as disposals. On Polymarket, that reasoning could catch:

• spending USDC to buy outcome shares (a disposal of USDC),
• selling outcome shares before resolution,
• redeeming winning shares for USDC at resolution, and
• converting USDC back to pounds.

Under this reading, losing positions produce allowable capital losses. Those losses can be set against other gains in the same year or carried forward, as long as you report them to HMRC.

3. Trading income: only in exceptional circumstances

CRYPTO20250 says HMRC would expect individuals to be trading in exchange tokens "only in exceptional circumstances". Where a trade does exist, "Income Tax will take priority over Capital Gains Tax." HMRC compares it to share trading and points to the case law at BIM56800. Calling yourself a trader isn't enough. Frequency, organisation, sophistication and commercial intent all count. A full-time market maker running bots is a very different case from someone who places a few event bets.

Comparison table

Rates and the allowance come from GOV.UK's Capital Gains Tax rates page. The 18% and 24% rates have applied since 30 October 2024, and the annual exempt amount is £3,000.

How the CGT maths works: pooling

If you rely on the cryptoasset reading, HMRC's matching rules decide which cost goes with which disposal. They are set out at CRYPTO22200:

1. Same-day rule: buys and sells of the same token on the same day are matched first.
2. 30-day rule (the "bed and breakfasting" rule): if you reacquire the same token within 30 days after a disposal, the new tokens are matched to that disposal instead of entering the pool.
3. Section 104 pool: anything left is matched against the pooled average cost for that token.

Each Polymarket outcome token is a separate token type, so every market and side gets its own pool. This is different from the US, where lots are matched first-in-first-out or by specific identification. A UK figure has to be worked out with UK pooling, not copied from a US-style report.

Worked example (CGT view)

Assume an exchange rate of £1 = $1.30 throughout, a higher-rate taxpayer, and no other gains in 2025/26.

• You convert £1,000 to roughly $1,300 USDC. In this example the rate doesn't move, so the USDC disposals produce no gain or loss.
• Market A: you buy 2,000 YES shares at $0.40, costing $800, which is £615.38. The market resolves YES and you redeem for $2,000, which is £1,538.46. Gain: £923.08.
• Market B: you buy 1,000 NO shares at $0.50, costing $500, which is £384.62. The market resolves YES, so your NO shares become worthless. Loss: £384.62. Whether a loss on an unredeemed position is allowable, and when, needs care. A negligible value claim may be relevant, so ask your adviser.

Under the betting view, the result is also £0 tax. The difference shows up in a losing year. Turn the example around to a net £2,000 loss: under the CGT view, that loss can be reported and carried forward against future crypto or share gains. Under the betting view, it is simply lost.

Now scale it up. A net gain of £20,000 under the CGT view means (£20,000 − £3,000) × 24% = £4,080 for a higher-rate taxpayer. Under the betting view it would be nil. Positions like that are where a UK adviser earns their fee.

Self Assessment: what and when

If you rely on the cryptoasset or trading view:

• Capital gains on cryptoassets go on the SA108 capital gains pages of your Self Assessment return. The 2025/26 online return is due 31 January 2027.
• You generally have to report capital gains if your taxable gains exceed the £3,000 allowance. You can also be required to report when total disposal proceeds exceed £50,000, even if no tax is due. With heavy Polymarket turnover, every buy and redemption counts as a disposal, so proceeds can pass £50,000 quickly. Check GOV.UK's guidance on selling cryptoassets for the current thresholds.
• Losses must be reported to be carried forward. The usual time limit for claiming them is four years after the end of the tax year.
• Keep records of every transaction: date, token, amount, pound value and fees. Under the Cryptoasset Reporting Framework, UK crypto providers have been collecting user details since January 2026, which gives HMRC more visibility.

Hyperliquid and the UK

Hyperliquid spot trades fall within the Cryptoassets Manual's CGT framework. There is no HMRC statement specific to perpetual futures or funding payments on a DeFi exchange, so get advice before treating them one way or the other. For the US side, see Hyperliquid taxes.

FAQ

Do you pay tax on Polymarket winnings in the UK?

It depends on which treatment applies. If positions are bets, winnings are tax-free and losses aren't usable. If they are cryptoasset disposals, gains above £3,000 are subject to CGT at 18% or 24%. HMRC has not ruled on this.

Is Polymarket taxable in the UK if I only used it a little?

Small, occasional use usually produces a result under the £3,000 annual exempt amount even under the CGT view. You may still need to report if disposal proceeds were large.

Can I deduct Polymarket losses in the UK?

Only under the CGT or trading views. Under the betting view, losses are not allowable. If you plan to rely on losses, keep full records and report them on time.

Does Polymarket send HMRC any information?

Polymarket's international exchange does not issue UK tax statements. UK-regulated crypto platforms you used to buy or sell USDC may report under the Cryptoasset Reporting Framework.

Does the US 90% gambling-loss rule affect UK residents?

No. That is a US federal rule. See the 90% limit explained if you are also a US taxpayer.

Get the numbers first

Whichever view you and your adviser take, you need clean per-market profit and loss, fees and dates. Run the free OddsFile check: paste your Polymarket address and see every market's result, including losing positions you never redeemed (see why those matter). UK-specific pooling reports are on our roadmap. Until they ship, the export gives your adviser the raw transaction trail.

Related reading: Polymarket taxes: the complete guide (US), Polymarket taxes in Canada, Polymarket tax in Australia.