If your crypto has dropped in value, there’s a silver lining: those losses could reduce your tax bill. Here’s how tax loss harvesting works in the UK.

How do Capital Gains Tax rules apply to Crypto?

HMRC has confirmed that Capital Gains Tax rules apply to crypto. Every time you sell, swap, spend, or gift crypto (except to a spouse/civil partner), you’ll make a capital gain or loss.

Everyone gets a £3,000 annual exempt amount (for 2024/25 and 2025/26). You only pay CGT on gains above this. Capital losses offset gains in the same tax year. If you have more losses than gains, the unused losses carry forward indefinitely.

What is Tax Loss Harvesting?

Tax loss harvesting means selling a crypto asset that’s dropped in value to ‘realise’ a loss. That loss can then be offset against gains from other disposals, reducing your overall CGT bill.

The key word is ‘realised’. If you’re still holding a crypto that’s fallen in value, that’s an unrealised loss. You can’t claim it until you actually dispose of the asset.

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Worked example: David offsets losses

David bought 1 ETH for £3,200 in November 2021. By March 2025, ETH is trading at £1,800. David sells his 1 ETH.

Realised capital loss: £1,400.

Try this in Recap’s calculator.

He also sold 0.5 BTC in the same tax year for a £12,000 gain.

David offsets the £1,400 ETH loss, reducing his taxable gain from £12,000 to £10,600. 

After the £3,000 allowance, he pays CGT on £7,600 instead of £9,000.

That saves him £252 at 18% (or £336 at 24%).

Important: David must not buy ETH again in the 30 days after the sale, or the bed and breakfasting rule will override his loss calculation.

Watch out for the bed and breakfasting rule

If you sell crypto and buy the same asset again within the next 30 days, the repurchase price is used as the cost basis for the sale (matched first-in, first-out). This effectively cancels out the loss you were trying to create. Make sure you wait at least 30 days after the sale before buying back in if you want to lock in a genuine loss. For a full explanation of the matching rules, see our main crypto tax guide.

Key rules for claiming crypto losses

• There’s no limit on the capital losses you can offset, but you need records to back them up.
• You must claim losses within four years of the end of the tax year they occurred.
• Losses must be used at the first opportunity against gains.
• You can’t claim losses on assets sold to a spouse, civil partner, or connected person.
• NFTs follow the same CGT rules but aren’t subject to pooling, each one is treated individually.

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Can you claim a loss for lost or stolen Crypto?

Lost your private key? Unfortunately, that’s not a disposal for Capital Gains Tax (CGT) purposes, the tokens still exist on the blockchain. However, HMRC may accept a ‘negligible value claim’ if you can show there’s no chance of recovery.

Similarly, theft or fraud doesn’t count as a disposal, but you may be able to file a negligible value claim if the tokens have become worthless.

*2024/25 is a split year: disposals before 30 October 2024 are taxed at 10%/20%; disposals on or after 30 October 2024 are taxed at 18%/24%.

Backfiling opportunity

Capital losses can be claimed up to four years back. If you have unreported losses from 2021/22 or later, you may still be able to offset them against current or future gains. Use HMRC’s Cryptoasset Disclosure Service for voluntary disclosure with reduced penalties.

How to calculate your Capital Gains Tax liability

1. Start by calculating the capital gain or loss for each crypto disposal within the tax year. You can do this by subtracting the allowable costs from your disposal proceeds using the formula:
   Capital gain or loss = disposal proceeds - allowable costs
2. Next, deduct the total capital losses from the total capital gains in the tax year to determine the net gain or loss for the year. You also deduct any capital losses carried forward from previous tax years, but can preserve your CGT annual exempt amount.
3. Then, subtract the CGT annual exempt amount for the tax year to find out your taxable gain. The rate of tax you'll need to pay depends on your total annual income.

It's important to note that crypto is taxed alongside capital gains from other property such as stocks and shares, so make sure to include these in your calculations.

FAQs

Can I use crypto losses to reduce my tax bill?

Yes. Realised capital losses can be offset against capital gains in the same tax year, or carried forward to future years.

How long can I carry forward losses?

Indefinitely, but you must claim them within four years of the end of the tax year in which they occurred.

Can I sell and rebuy the same crypto to create a loss?

Not if you buy it back within 30 days of the sale. The bed and breakfasting rule means the repurchase price becomes the cost basis, cancelling the intended loss.

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Identifying which assets are ideal for Tax Loss Harvesting

Our crypto tax calculator partner Recap, helps you calculate your taxes and provides a live estimate of your capital gains for the active tax year helping you to understand your tax liability. The Recap dashboard highlights your best and worst performing assets helping you identify which are ideal for tax loss harvesting.

Seek help from tax professionals

Writing off your losses can dramatically reduce your tax bill, but it’s a strategy that should only be used by those who understand the UK tax rules and are comfortable with the risk of buying and selling cryptocurrency and the volatility of the crypto market. It’s important to consult a tax professional to help you navigate the tax rules before making any decisions.

The information provided in this article is for general informational purposes only and should not be construed as financial or tax advice. We recommend consulting with a qualified tax advisor or financial professional who can provide personalised advice tailored to your specific circumstances.