If you’ve bought, sold, or swapped cryptocurrency in the UK, you almost certainly have a tax obligation — even if your gains feel modest. HMRC treats cryptoassets as a form of property, not currency, which means every disposal can trigger a capital gains tax (CGT) event. Yet most wallet and exchange users have no clear picture of how the calculation actually works, what pooling rules apply, or how losses can reduce their bill. This guide walks through HMRC’s exact methodology for calculating crypto capital gains tax UK HMRC style, covering the Section 104 pool, the 30-day same-asset rule, allowable costs, and what the 2026 reporting landscape looks like for both centralised exchange users and self-custody wallet holders.
How HMRC Classifies Cryptoassets for Tax Purposes
HMRC’s position is set out in its Cryptoassets Manual (CRYPTO10100 onwards), published and updated on GOV.UK. The manual states that cryptoassets are not currency or money for UK tax purposes. Most individuals hold them as capital assets, meaning gains and losses fall under Capital Gains Tax rather than Income Tax — unless you are trading with such frequency and sophistication that HMRC deems your activity a trade.
What counts as a disposal?
- Selling crypto for fiat (GBP, USD, EUR, etc.)
- Exchanging one cryptoasset for another (e.g., ETH for SOL)
- Using crypto to pay for goods or services
- Gifting crypto to someone other than a spouse or civil partner
Transferring crypto between your own wallets — for example, moving ETH from Coinbase to a Ledger hardware wallet — is not a disposal and creates no CGT event. However, HMRC expects you to keep records proving both wallets belong to you, because transaction fees incurred during that transfer may still affect your cost basis.
The Section 104 Pool: How Cost Basis Is Calculated
The UK does not use First-In-First-Out (FIFO) or Last-In-First-Out (LIFO) as a primary method. Instead, HMRC requires individuals to use the Section 104 pooling rule, named after Section 104 of the Taxation of Chargeable Gains Act 1992 (TCGA 1992). Under this rule, all units of the same cryptoasset you hold are merged into a single pool with a combined cost.
How the pool works in practice
- Each time you acquire a token, the purchase cost is added to the Section 104 pool for that asset.
- Each time you dispose of a token, you calculate the average cost per unit across the pool.
- The allowable cost for the disposal is: (units sold ÷ total units in pool) × total pooled cost.
- The gain is: disposal proceeds − allowable cost.
For example: you buy 2 ETH at £1,000 each (pool cost: £2,000), then buy 1 more ETH at £1,600 (pool cost: £3,600, 3 units). Average cost per unit = £1,200. If you later sell 1 ETH for £2,000, your gain is £2,000 − £1,200 = £800.
The 30-Day Same-Asset Rule (Bed and Breakfasting)
HMRC’s anti-avoidance rules prevent a tactic known as “bed and breakfasting” — selling an asset to realise a loss, then immediately repurchasing it. Two override rules take priority over the Section 104 pool:
- Same-day rule: If you buy and sell the same cryptoasset on the same day, the buy matches the sell before any pool calculation.
- 30-day rule: If you sell a cryptoasset and repurchase the same asset within 30 days, the repurchase cost is matched against the sale first.
These rules are detailed in HMRC’s Cryptoassets Manual at CRYPTO22200. Failing to apply these correctly is one of the most common errors in DIY crypto tax calculations, particularly for active traders who swing-trade the same token repeatedly.
Allowable Costs and Deductions
You are permitted to deduct certain costs from your disposal proceeds before calculating gain. HMRC’s manual (CRYPTO22150) specifies these as:
- The original acquisition cost (in GBP at the date of acquisition)
- Transaction fees paid in GBP or the GBP equivalent of fees paid in crypto
- Costs of transferring tokens into or out of a wallet, where clearly attributable to the disposal
Gas fees on Ethereum — documented in the Ethereum Foundation’s developer documentation — are a real and recordable cost. If you paid 0.005 ETH in gas to execute a swap, the GBP value of that fee at the time of the transaction is an allowable deduction. This matters for DeFi users who interact with smart contracts regularly.
You cannot deduct the cost of hardware wallets (such as a Ledger Nano or Trezor device) as an allowable cost against your gains — HMRC treats these as personal capital expenditure, not a direct cost of acquisition or disposal.
Annual Exempt Amount and Reporting Thresholds for 2025–26
For the 2025–26 tax year, the Capital Gains Tax Annual Exempt Amount is £3,000, reduced from £12,300 in earlier years following the Spring Budget 2023 changes. Gains below this threshold are not taxable, but you may still have a reporting obligation.
Under HMRC’s self-assessment rules, you must complete a tax return if:
- Your total capital gains in the tax year exceed £3,000; or
- Your total proceeds from disposals exceed four times the annual exempt amount (£12,000 for 2025–26), even if the net gain is below the threshold.
CGT rates for cryptoassets mirror those for other assets: 18% for basic-rate taxpayers and 24% for higher and additional-rate taxpayers, following the Autumn Budget 2024 changes that aligned residential property and other asset rates.
Record-Keeping for Wallet and Exchange Users
HMRC expects you to retain records for at least five years after the 31 January self-assessment deadline for the relevant tax year. This means records from the 2025–26 tax year must be kept until at least January 2032.
What records to keep
- Date of every transaction
- Type of cryptoasset and number of units
- GBP value at the time of each transaction (using a consistent pricing source)
- Wallet addresses involved
- Exchange transaction IDs and CSV exports
For self-custody users, on-chain data is publicly verifiable via block explorers (Etherscan for Ethereum, Blockchain.com for Bitcoin). MetaMask’s support documentation explicitly recommends exporting transaction history via Etherscan rather than the wallet UI itself for tax purposes. Centralised exchange users should download full CSV transaction histories regularly — Binance, Coinbase, and Kraken all offer these, but records can disappear if an account is closed.
What This Means for You
The practical reality for most UK holders is that crypto tax is both unavoidable and manageable if you keep good records from the start. The key points to act on:
- Apply the Section 104 pool — not FIFO — when calculating cost basis for each cryptoasset separately.
- Always check the same-day and 30-day rules before assuming a loss is allowable.
- Convert every transaction to GBP at the transaction date — HMRC does not accept USD-denominated records without conversion.
- Include gas and network fees as allowable costs where they are clearly part of the disposal.
- Report on self-assessment if total proceeds exceed £12,000, regardless of whether you made a net gain.
- Consider specialist crypto tax software (Koinly, CoinTracker, Recap) that applies UK-specific pooling rules automatically — but verify the output manually for high-value transactions.
HMRC has increased its focus on cryptoasset compliance significantly, issuing information notices to major exchanges operating in the UK as part of its data-gathering powers under Schedule 36, Finance Act 2008. The 2026 landscape will also see the OECD’s Crypto-Asset Reporting Framework (CARF) begin to take effect, requiring exchanges to report user data directly to tax authorities across participating jurisdictions. Accurate, contemporaneous record-keeping is no longer optional — it is essential.
