Crypto losses and capital gains tax relief: how UK investors can claim and report losses to HMRC

How to claim capital gains tax (CGT) relief on crypto losses and report them to HMRC

Crypto assets can generate significant gains, but they can also produce substantial losses. Falling token values, failed exchanges, inaccessible wallets and other events can leave investors holding assets worth far less than they originally paid for them.

Where a loss qualifies for tax relief, it may be possible to use it to reduce current or future capital gains tax (CGT) liabilities. However, the rules are not always straightforward and opportunities can be missed if losses are not identified, calculated or reported correctly.

This article focuses on crypto losses for UK resident individuals who hold crypto assets as investments.

For a broader overview of the UK tax treatment of crypto assets, see our article The taxation of crypto assets.

Key rules for claiming capital gains tax relief on crypto losses

When reviewing crypto asset losses, investors should consider:

• Whether any disposal has already created an allowable loss
• Whether a negligible value claim can be made
• Whether the timing of a disposal can be chosen to maximise relief
• Whether losses have been reported to HM Revenue & Customs (HMRC)
• Whether unreported losses remain within the time limit for claiming
• Whether sufficient records are being kept to support future claims

Considering these points can help ensure loss relief is maximised.

When does a crypto loss qualify for capital gains tax relief

HMRC generally treats crypto assets as chargeable assets for CGT purposes.

A gain or loss may arise whenever a crypto asset is disposed of. Common examples include:

• Selling crypto assets for money
• Exchanging one crypto asset for another (crypto-to-crypto transactions eg exchanging bitcoin for Ether, or using bitcoin to buy a non-fungible token (NFT))
• Using crypto assets to buy goods or services
• Giving crypto assets to another person (unless it’s a gift to their spouse or civil partner)

How to calculate crypto gains and losses for UK tax purposes

The gain or loss is generally calculated using the sterling value of the asset when it was acquired and when it was disposed of. This means that exchange rates can be relevant, even where transactions take place entirely within the crypto ecosystem. In some cases, conversions may be needed before arriving at a sterling value.

Pooling rules also apply to many crypto assets, including widely traded tokens such as Bitcoin and Ethereum. As explained in our article The taxation of crypto assets, gains and losses on fungible crypto assets are often more complex than simply comparing purchase and sale prices. The same day and 30-day matching rules, often known as the bed and breakfasting rules, apply before disposals are matched with the pooled holding. This means that where a crypto asset is sold and then reacquired shortly afterwards, the disposal is matched with the later acquisition rather than the pooled holding.

Some investors deliberately realise losses so that they can be used against chargeable gains, a strategy often referred to as loss harvesting. However, care is required, as the bed and breakfasting rules may mean that a disposal does not produce the loss that was expected.

Importantly, the UK does not tax unrealised gains or allow relief for unrealised losses. A loss will only arise when there’s a disposal or where a negligible value claim (NVC) is made.

How to offset crypto losses against capital gains

There are no special CGT loss rules for crypto losses; the same rules apply as for other capital losses.

Losses arising in a tax year are first set against chargeable gains realised in the same tax year. If losses exceed gains, the unused balance can be carried forward. Carried-forward losses are used only to the extent needed to reduce later gains to the available annual exempt amount.

Capital losses cannot be carried back to earlier tax years.

They also cannot be set against income, such as employment income, rental income or pension income.

If an investor has flexibility over when to realise a loss, it may be worth considering both current and expected future gains.

Example for 2026-27

If an investor has already realised current year gains qualifying for Business Asset Disposal Relief (subject to CGT at 18%), but expects to realise a chargeable gain on a residential property in the next tax year (subject to CGT at 24% for a higher or additional rate taxpayer), they may choose to delay realising the loss until that next tax year, so that they can maximise the tax benefit obtained from the loss.

The most appropriate approach will depend on the individual’s circumstances.

How negligible value claims (NVCs) work for worthless crypto assets

A disposal is normally required before a loss can be claimed. However, there are situations where crypto assets have become worthless without an actual disposal taking place. In these circumstances, it may be possible to make an NVC.

A successful NVC claim treats the asset as though it had been disposed of and immediately reacquired at nil base cost. This can enable an allowable capital loss to arise without an actual sale.

Examples that may support an NVC include:

• Assets held through a failed exchange where there is no realistic expectation of recovering them
• Specific tokens that have become effectively worthless
• The loss of private keys where there is no prospect of recovering the keys or accessing the tokens

Where tokens form part of a pooled holding, the claim must generally cover the whole pool of that particular crypto asset.

Crypto losses from failed exchanges

Failed exchanges can present particular challenges. In some cases, obtaining complete transaction histories and valuations may be difficult, especially where records are no longer accessible.

Care is required when making an NVC. HMRC will reject a claim if it considers that the asset still has more than negligible value.

Can you claim relief on stolen crypto assets?

HMRC does not consider theft to be a disposal, as the individual still owns the stolen asset and has a right to recover it. This means victims of theft cannot claim a loss for CGT.

Using burn addresses to crystalise a crypto tax loss

Some blockchains include so-called burn addresses.

These are inaccessible addresses that permanently remove compatible crypto assets from circulation. Once tokens have been sent to the relevant burn address, they cannot be recovered.

Sending crypto assets to a burn address is generally treated as a disposal because ownership of the asset has been given up.

Investors who hold assets they consider worthless and do not expect to recover in value may consider using a burn address to crystallise a loss. This can avoid having to rely on a potentially subjective NVC.

This approach is most commonly seen in relation to illiquid or effectively worthless tokens, including some non-fungible tokens.

Crypto losses for internationally mobile individuals including former non-doms

The position can be more complex for internationally mobile individuals, including non-doms who previously claimed the remittance basis.

For CGT purposes, HMRC’s view is that crypto assets beneficially owned by a UK resident are situated in the UK, unless they represent an underlying asset situated outside the UK. This can affect whether crypto losses are treated as UK losses.

Internationally mobile individuals should seek specialist advice on their circumstances.

How to report crypto losses to HMRC

Reporting losses correctly is important.

Where an individual is required to complete a self-assessment tax return, losses should be included in the crypto assets section of the SA108 capital gains summary pages, together with appropriate supporting calculations.

Individuals who are not required to submit a tax return should notify HMRC of allowable losses by writing to HMRC’s Capital Gains Tax Queries address. There’s no prescribed format for the letter, but as a minimum it should quantify the losses and the tax year(s) in which they arose, and also include a calculation to support these figures. If you have a Unique Taxpayer Reference (UTR) then include this as a reference, but if you don’t, we recommend including your National Insurance number.

The normal deadline for claiming a capital loss is four years from the end of the tax year in which the loss arose.

Example

The deadline for claiming CGT losses realised in the 2026-27 tax year is 5 April 2031.

Crypto tax record keeping requirements

Maintaining accurate records is essential. Crypto asset transaction data may not be retained indefinitely by exchanges or wallets, and obtaining historic information later can be difficult or, in some cases, impossible. Investors should therefore keep transaction records, supporting documentation and details of losses claimed.

Expert advice on claiming crypto asset losses

Our crypto and digital assets team advises clients on the tax treatment of digital assets and associated reporting obligations.

We can help with:

• Calculating gains and losses from crypto asset transactions
• Considering the availability of negligible value claims (NVCs)
• Reconstructing calculations and assisting with NVC claims where information from failed exchanges is limited
• Specialist advice for internationally mobile individuals
• Wider tax planning and structuring involving digital assets

If you would like to discuss your circumstances, please speak to your usual Saffery contact or use the Get in Touch form.

FAQs

Can I claim a tax loss if my crypto assets have fallen in value?

Not usually. A fall in value alone does not create an allowable loss. A disposal or a valid negligible value claim will generally be required.

Can I carry forward crypto losses to future tax years?

Yes. Allowable crypto losses are first set against gains in the same tax year, with any unused balance carried forward against future chargeable gains.

Can crypto capital losses be offset against income?

No. Crypto losses are generally capital losses and cannot be set against employment income, rental income or pension income.

Can crypto losses reduce future capital gains tax?

Losses can generally be carried forward and used against future chargeable gains, provided they have been properly claimed with HMRC.

Can I make negligible value claim for crypto assets?

A negligible value claim may allow a loss to be claimed where a crypto asset has become effectively worthless, even though it has not been disposed of.

What is the deadline for reporting crypto losses to HMRC?

The deadline is four years from the end of the tax year in which the loss arose.