Capital Gains Tax on Crypto: UK HMRC Rules & Pooling Math 2026/27

Cryptocurrency and digital assets have exploded in popularity in the UK, but HMRC does not view them as a form of money. Instead, they are legally classified as **”cryptoassets”** and treated as intangible capital properties. This means that if you buy, sell, trade, swap, or spend cryptocurrencies, those transactions are subject to Capital Gains Tax (CGT). Because crypto portfolios often consist of hundreds of automated swaps and micro-transactions, calculating the correct cost basis can be incredibly complex. In this comprehensive guide, we explain the HMRC tax guidelines for crypto, detail the Section 104 pooling rules for tokens, walk through a step-by-step swap calculation, and outline compliance requirements.

1. Taxable Crypto Events: What Triggers CGT?

A common misconception is that you only owe tax when you cash out your crypto back into British Pounds (GBP). Under HMRC guidelines, any **disposal** of crypto triggers CGT. A disposal occurs when you:

• Sell cryptocurrency for fiat currency (e.g. selling Bitcoin for GBP or USD).
• Swap one cryptocurrency for another (e.g. trading Ethereum for Solana). *This is a double transaction: you are selling ETH and buying SOL simultaneously, and the gain on the sold ETH is taxable immediately.*
• Use cryptocurrency to pay for goods or services (e.g. buying a laptop using Litecoin).
• Gift cryptocurrency to another person (excluding transfers to a spouse, which are tax-free).

To check how these rules impact your net investment and calculate tax due, use our dedicated Capital Gains Tax Calculator.

2. Section 104 Token Pooling Rules

Just like standard shares, you cannot choose which specific tokens you sold. HMRC requires you to group your purchases of a specific token (e.g., all your Ethereum) into a single **Section 104 Pool** to determine the rolling average cost basis. Every time you buy more of that token, the pool cost and count increase. Every time you sell, you deduct the average cost from the pool.

Strict Matching Exceptions: To prevent quick tax-loss harvesting, you must apply these rules in order before using the Section 104 Pool:

1. **Same-Day Rule:** Match sales against any acquisitions of the same token made on the exact same day.
2. **30-Day Rule:** Match sales against any acquisitions of the same token made in the 30 days following the sale.

3. Step-by-Step Mathematical Example: Token Swap

Let’s run a calculation for an investor in the 2026/27 tax year who swaps **2 Ethereum (ETH)** for **Solana (SOL)**. Here is their transaction history:

• **Purchase 1 (Jan 2024):** Bought 5 ETH at £1,500 per ETH. Cost = £7,500.
  • ETH Pool: 5 tokens | Total Cost: £7,500 (Average cost = £1,500/ETH).
• **Purchase 2 (May 2024):** Bought 3 ETH at £2,500 per ETH. Cost = £7,500.
  • New ETH Pool: 5 + 3 = 8 tokens.
  • New Total Cost: £7,500 + £7,500 = £15,000.
  • New Average Cost Basis: £15,000 / 8 ETH = £1,875 per ETH.

The Swap Transaction (November 2026):

The investor trades **2 ETH** for **60 SOL**. At the time of the swap, the market value of 1 ETH is **£3,000** (making the total swap value £6,000):

• Deemed Sale Proceeds: 2 ETH × £3,000 = £6,000 (This is the value used to calculate the gain).
• Cost Allocation from Pool: 2 ETH × £1,875 (average pool cost) = £3,750.
• Gross Capital Gain: £6,000 − £3,750 = £2,250.
• Update ETH Pool: 8 − 2 = 6 ETH remaining | Remaining Cost: £15,000 − £3,750 = £11,250.

Applying Tax (assuming higher-rate 24% band):

• Taxable Gain: £2,250 (assuming the £3,000 annual allowance has already been exhausted by other asset sales).
• Tax Due (24% Rate): £2,250 × 24% = £540.00.

4. Staking, Airdrops, and Income Tax

Not all crypto transactions are subject to Capital Gains Tax. If you receive tokens as income, they are taxed under **Income Tax** rules at your marginal rate (20%, 40%, or 45%), rather than CGT:

• Staking Rewards & Yield Farming: Tokens earned by staking or lending are treated as miscellaneous income, taxed at their GBP market value on the day you receive them.
• Airdrops: If you receive tokens in an airdrop without doing anything, it is generally exempt from income tax, but if you received them in exchange for services (e.g. social media marketing), it is taxed as income.
• Subsequent Sales: Once you own these tokens, their acquisition cost basis is set to the value used for the Income Tax calculation. When you eventually sell them, any subsequent growth is subject to Capital Gains Tax.

5. Frequently Asked Questions

Does HMRC tax swapping one crypto for another?

Yes. Swapping one token for another (e.g. BTC for ETH) is legally treated as a disposal of the first token. You must calculate the gain in GBP based on the token’s market value at the time of the swap.

How does HMRC know about my crypto transactions?

HMRC has automated data-sharing agreements with all major centralized crypto exchanges operating in the UK (such as Coinbase and Kraken) and actively uses sophisticated data-matching software to identify undisclosed accounts.

What is the crypto tax rate for 2026/27?

The rates align with standard CGT brackets: 18% for basic rate taxpayers and 24% for higher/additional rate taxpayers.

Can I offset losses on crypto?

Yes. If you lose money on a crypto asset sale or swap, you can register the capital loss with HMRC to offset against future crypto or stock gains.

What happens if I lose my private keys?

If you lose your private keys or a token becomes worthless (e.g. a rug-pull), you can submit a “Negligible Value Claim” to HMRC to write off the asset and realize a capital loss for tax purposes.

Is crypto mining taxable?

Yes. If you mine cryptocurrency as a hobby, the tokens are taxed as miscellaneous income. If you operate a large-scale mining business, it is taxed as trading income (subject to Corporation or Self-Employment Income Tax).

Do stablecoins trigger CGT?

Yes. Even though stablecoins (like USDT or USDC) are pegged to fiat currencies, swapping other tokens for stablecoins is still a disposal and triggers a CGT calculation.

Can I transfer crypto to my spouse tax-free?

Yes. Gifting cryptocurrency to your spouse or civil partner is treated on a “no gain, no loss” basis, allowing you to double your household’s £3,000 tax-free allowance when selling.

Statutory & Legislative References

• Taxation of Chargeable Gains Act 1992 – Section 21: Legislation outlining the definition of assets for capital gains, including digital currencies.
• HMRC Cryptoassets Manual: The official guidance framework outlining token pooling, matching exceptions, and staking tax treatment.
• Finance Act 2024: Setting statutory CGT rates on capital disposals at 18% and 24%.