Swapping one cryptoasset for another is a disposal for Capital Gains Tax, even though no money reached your bank account. That single rule accounts for most of the unexpected tax bills, and most of the panic when HMRC’s new reporting data starts landing.
Here is the framework, with the arithmetic, and the parts that are genuinely uncertain flagged as such.
Almost nobody is a crypto trader for tax purposes
The starting point determines which tax applies, and HMRC’s Cryptoassets Manual is unusually direct: “Only in exceptional circumstances would HMRC expect individuals to buy and sell exchange tokens with such frequency, level of organisation and sophistication that the activity amounts to a financial trade in itself” (CRYPTO20250).
If the activity is a trade, Income Tax takes priority over Capital Gains Tax. For almost everyone it is not. The activity is investment, and Capital Gains Tax applies. Calling yourself a trader does not make you one — HMRC’s guidance says the label is not sufficient, and the test comes from case law on trading in shares and securities.
What counts as a disposal
You dispose of tokens when you:
- Sell them for pounds or any other currency
- Exchange them for a different type of cryptoasset
- Use them to pay for goods or services
- Give them away, unless to your spouse, civil partner or a charity
Every swap, every token used to buy an NFT and every purchase paid for in bitcoin is a separate disposal, computed in sterling.
Pooling: how the cost is worked out
You cannot pick which coins you sold. Tokens of the same type go into a pool, and each disposal takes a proportionate slice of the pooled cost.
Worked example
| Date | Event | Pool after |
|---|---|---|
| 1 Mar 2026 | Buy 2 BTC for £40,000 | 2 BTC, cost £40,000 |
| 10 Jun 2026 | Buy 1 BTC for £26,000 | 3 BTC, cost £66,000 (avg £22,000) |
| 5 Sep 2026 | Sell 1 BTC for £30,000 | 2 BTC, cost £44,000 |
| 20 Oct 2026 | Swap 0.5 BTC (worth £16,000) for ETH | 1.5 BTC, cost £33,000 |
The September sale. Pooled cost deducted is one third of £66,000 = £22,000. Gain = £30,000 − £22,000 = £8,000.
The October swap. Proceeds are the £16,000 market value at the date of the exchange. Pooled cost is 0.5 ÷ 2 × £44,000 = £11,000. Gain = £5,000. The ETH enters its own pool at £16,000.
Total gains for the year: £13,000.
The same-day and 30-day rules
Tokens are not pooled where you buy tokens of the same type on the same day you sell, or within 30 days of selling. Those acquisitions are matched against the disposal first, in that order, before the pool is touched, mirroring the share identification rules in helpsheet HS284.
The practical effect: selling to crystallise a loss and buying straight back does not work. The reacquisition is matched to the disposal and the loss does not arise as intended.
Companies have different matching rules. If your crypto sits in a limited company, do not apply the 30-day rule — take advice on the company position.
The tax on the gain
| 2026/27 Capital Gains Tax | Figure |
|---|---|
| Annual exempt amount | £3,000 |
| Rate within the basic rate band | 18% |
| Rate above the basic rate band | 24% |
Gains are stacked on top of your income to decide which rate applies.
Continuing the example. Say you also have employment income of £40,000. Taxable income is £40,000 − £12,570 = £27,430, leaving £10,270 of the £37,700 basic rate band unused. Gains of £13,000 less the £3,000 annual exempt amount gives £10,000 of taxable gains, which fits inside that band. Tax at 18% = £1,800. Earn more and the same gains cost 24%.
Crypto is not UK residential property, so the 60-day reporting and payment deadline does not apply. Report through your Self Assessment return, or through HMRC’s Capital Gains Tax real time service. Losses only count if you report them.
Allowable costs
Deductible against the gain: transaction fees, advertising for a buyer or seller, drawing up a contract, valuation costs incurred to work out the gain, and the proportion of the pooled cost.
Not deductible: the costs of mining activities, including equipment and electricity. Nor anything already deducted against profits for Income Tax.
Staking, mining and lending are income, not gains
Tokens received from mining, staking, lending or DeFi arrangements, where you are not carrying on a trade, are other taxable income — miscellaneous income, on helpsheet HS325 lines. The £1,000 trading and miscellaneous income allowance covers it. HMRC’s thresholds:
| Total miscellaneous income from all sources | What to do |
|---|---|
| £1,000 or less | Nothing |
| £1,000 to £2,500 | Contact HMRC |
| Over £2,500 | Register for Self Assessment |
Tokens received as income are taxed twice over their life, but not on the same amount. You pay Income Tax on the sterling value when you receive them, and that value becomes your cost. Capital Gains Tax then applies only to the increase since receipt.
If an employer pays you in tokens, that is employment income. Exchange tokens such as bitcoin are readily convertible assets, so Income Tax and National Insurance should go through PAYE.
For businesses accepting crypto
Take payment in tokens and the receipt is trading income, measured in sterling at the date of receipt. The tokens then sit as an asset at that value, and a later disposal is a separate chargeable event. VAT is unaffected by how a customer pays.
For a company, gains on cryptoassets held as investments form part of taxable total profits at the Corporation Tax rate — 19% up to £50,000, an effective 26.5% to £250,000, and 25% above. There is no annual exempt amount for companies.
Records, and what HMRC now receives
Keep, for each pool: the type of token, the date of each disposal, the number disposed of, the number remaining, the sterling value, bank statements, and pooled costs before and after each disposal.
Exchange reports are not tax calculations. HMRC says so explicitly, and adds that exchanges will not track your pooled costs. If you have used three exchanges and a wallet, no one report contains your position.
From 1 January 2026, cryptoasset service providers collect and report user data to HMRC under an international information-sharing agreement. You must give every provider you use — including non-UK ones — your name, date of birth, address and tax identification number, which for a UK individual is a National Insurance number or UTR.
Inaccurate details, or none, given to a UK provider carries a penalty of up to £300, potentially more for non-UK providers. Unpaid tax HMRC finds carries up to 100% of the tax plus interest, and more for offshore matters.
For earlier years, HMRC’s Cryptoasset Disclosure Service exists. Unprompted disclosure attracts lower penalties than being contacted first.
Lost keys and worthless tokens
Misplacing a private key does not count as a disposal — the tokens and the key both still exist, you just cannot reach them (CRYPTO22400). Where you can show there is no prospect of recovering the key, a negligible value claim may be possible, treating you as having disposed of and reacquired the tokens so a loss can be crystallised. HMRC has to accept the claim; it is not automatic.
Frequently asked questions
Do I pay tax if I swap one crypto for another?
Yes. Exchanging tokens for a different type of cryptoasset is a disposal for Capital Gains Tax, even though no money reaches your bank account. Proceeds are the market value in sterling at the date of the exchange, and the tokens you receive enter their own pool at that value.
Is crypto taxed as income or capital gains in the UK?
Capital Gains Tax for almost everyone. HMRC’s Cryptoassets Manual states that only in exceptional circumstances would an individual’s buying and selling amount to a financial trade. Tokens received from mining, staking, lending or employment are different — those are income when received, and Capital Gains Tax then applies only to any increase in value afterwards.
How much crypto profit is tax free?
The annual exempt amount for 2026/27 is £3,000 of total gains across all assets, not per asset. Above that, gains are taxed at 18% within your basic rate band and 24% above it. Separately, a £1,000 trading and miscellaneous income allowance can cover small amounts of staking or mining income.
What is the 30-day rule for crypto?
Tokens bought on the same day you sell, or within 30 days of selling, are not pooled. They are matched against that disposal first, using the same identification rules as shares. It means selling at a loss and buying straight back does not produce the loss you were expecting.
Does HMRC know about my crypto?
Increasingly, yes. From 1 January 2026 cryptoasset service providers collect user identity data and report it to HMRC, with information exchanged internationally between participating countries. You are required to give those details to every provider you use, and penalties of up to £300 apply for failing to.
Getting your position built properly
The hard part of crypto tax is rarely the rates. It is reconstructing pooled costs across several exchanges and wallets, in sterling, for years where nobody kept records — and it is better done before HMRC’s reporting data prompts the question.
SmartFiling handles Self Assessment and MTD for Income Tax on a fixed fee, including capital gains reporting. Every submission is reviewed by an ICAEW Chartered Accountant.
