Most crypto investors who come to us for the first time have been using first-in-first-out or simple average-cost calculations to track gains. Those approaches are intuitive but they are not what HMRC requires. UK CGT on cryptoassets follows the same share-pooling framework used for shares and securities, and the three rules that govern it can produce materially different outcomes from the methods built into many overseas trading platforms.
The Section 104 pool
For each distinct cryptoasset held, HMRC treats all units of that token as a single pool with a running average cost. If you buy 1 BTC at £20,000 and later buy another 1 BTC at £30,000, the pool contains 2 BTC at an average cost of £25,000 per unit. A subsequent disposal of 0.5 BTC carries a cost basis of £12,500, regardless of which physical satoshis are sold. The pool is updated continuously as new acquisitions arrive and disposals are made.
The same-day rule
Before the pool is consulted, HMRC requires acquisitions and disposals on the same calendar day to be matched against each other. The rationale is to prevent artificial intra-day trades from manipulating the pool. In practice, active traders who buy and sell the same token multiple times in a single day will see the same-day rule trigger frequently, and the cost basis for those matched lots is determined separately from the long-term pool.
The 30-day rule (bed-and-breakfasting)
The 30-day rule is the one that catches investors out most often. If you dispose of a token and then reacquire it within 30 days, HMRC requires the disposal to be matched against the later acquisition rather than the pool. This stops loss harvesting through immediate repurchase. The economic effect is that the loss the investor thought they had crystallised is deferred, because the cost basis of the rebought tokens is set to the disposal proceeds rather than the original pool cost.
Worked example. An investor with a pool of 5 ETH at an average cost of £2,000 per unit sells 2 ETH on 1 November for £1,500 each, expecting to claim a £1,000 capital loss. They buy 2 ETH back on 10 November at £1,400 each because the price has dropped further. The 30-day rule applies, so the disposal is matched to the November 10 acquisition. The "loss" becomes £1,500 minus £1,400 equals £100 per coin, and the pool retains the original 5 ETH at the original average cost. The bigger paper loss has effectively been deferred into the pool cost basis.
The matching order
The full hierarchy that HMRC requires:
- Same-day acquisitions are matched first.
- Acquisitions in the following 30 days are matched next.
- Remaining disposals are matched against the Section 104 pool.
Where things get complicated
The rules apply per identical token. ETH on Coinbase and ETH in a self-custody wallet are the same asset and go into one pool. Wrapped tokens (such as WBTC and BTC, or stETH and ETH) are where the analysis becomes more contested. HMRC has indicated that where the wrapped token represents a different legal right, it is treated as a separate asset, which can produce a disposal of the underlying when wrapping occurs.
Crypto-to-crypto trades
Every crypto-to-crypto trade is a disposal of the asset being sold and an acquisition of the asset being bought, both valued in sterling at the time of the trade. For each disposal the pooling rules apply to the asset being sold, and for each acquisition the pool of the new asset is updated. A high-frequency trader can generate hundreds of disposals in a year, every one requiring a sterling valuation and a matched cost basis.
Practical takeaways
- Use software that explicitly models HMRC pooling, not generic FIFO.
- Be careful about repurchasing within 30 days if you are trying to crystallise a loss; the effect is to defer it.
- Reconcile your records to wallet balances at the year end. Pooling errors compound silently.
How we help
PushDigits prepares CGT computations for crypto investors with positions ranging from straightforward to highly complex. We work with your exchange exports and on-chain data, apply the matching rules correctly and produce the figures required for your Self Assessment. Visit our Self Assessment and tax planning pages, or contact us to discuss your portfolio.