Token taxes on Uniswap explained: what they are, why projects use them
11 November 2026
Some tokens take a small cut every time someone buys or sells them on Uniswap. That cut is called a tax. You'll see it written as "5/5" (5% on buys, 5% on sells) or "0/3" (no buy tax, 3% on sells).
Uniswap itself doesn't add taxes. Every pool already has a normal trading fee that goes to liquidity providers. A tax is extra, and it's set by the token's team.
How a tax works
- Buy tax: when you buy, you get slightly fewer tokens. The difference goes to wherever the team chose.
- Sell tax: when you sell, you get slightly less ETH or USDC back.
- Where it goes: usually a project wallet (often called the treasury), the pool's liquidity providers, a burn, or a split between several of these.
Why projects use a tax
- To fund the project. Development, marketing and listings cost money. A tax pays for them from trading, without the team selling its own tokens.
- To reward holders and liquidity providers. Part of every trade can go back to the pool or to holders, which rewards people who stay.
- To shrink supply. A tax can burn tokens on every trade, so there are fewer of them over time. See what auto-burn does.
- To slow down quick flippers. A sell tax, or one that gets smaller the longer someone holds, makes it less attractive to buy and dump within minutes.
- To make bot attacks cost more. Bots that trade in and out in seconds pay the tax each time, which eats their profit.
The downsides
- Traders pay more. A 5/5 tax means a round trip costs about 10% plus normal fees. Many traders skip taxed tokens, and some bots and apps avoid them.
- Taxes can be abused. If the team can raise the tax after launch, they can push it to 99% and trap everyone. That is one of the most common rug pulls.
- Old-style tax tokens break things. When the tax is written into the token itself, some wallets, bridges and swap apps can't handle it, and trades fail.
Two ways to add a tax
1. Inside the token (the old way)
The tax is part of the token's own code, so it applies to every transfer. This is the classic "tax token". It works everywhere the token goes, but it causes the compatibility problems above, and many of these tokens let the owner change the rate.
2. In the pool, with a hook (the Uniswap v4 way)
The token stays a normal token, and the tax lives in the Uniswap pool's hook. It only applies to trades in that pool, wallets and other apps treat the token like any other, and the rate can be fixed for good at launch. There's a full comparison in hook vs tax token.
What's a normal tax?
Most projects that use one stay between 1% and 5% each way. Above 10% is rare and puts most traders off. On UniHooks, buy-side cuts are capped at 10%, the sell tax at 10%, and everything taken from one trade at 20%.
How to check a token's tax before you buy
- Paste the token's address into UniHooks and open its pool's hook.
- Read "How this hook works": it says in plain English whether the hook takes a cut of trades, and how much when the rate is fixed.
- Check who controls it. If someone can change the fee later, the tax you see today isn't guaranteed.
More in our checklist before you buy.
Setting one up for your token
With Create you can add a buy tax, a sell tax or both to your token's Uniswap pool in one transaction, with no code. The rate is locked in at launch, and you keep 100% of it. Step by step in how to add a buy or sell tax.