Calculating Bitcoin CGT sounds simple — proceeds minus cost. In practice, HMRC's matching rules determine which cost you can use, and getting that wrong produces the wrong gain. Here is the complete step-by-step process.
Step 1: Establish your disposal proceeds
Your proceeds are the GBP value at the moment of disposal. If you sold Bitcoin for GBP, the proceeds are what you received. If you swapped BTC for ETH, use the GBP market value of the Bitcoin you gave up at the time of the swap — not the value of the ETH you received.
Include any exchange fees deducted from the proceeds (e.g. if you sold 1 BTC and received £44,800 after a £200 fee, your net proceeds are £44,800).
Step 2: Apply HMRC's matching rules to find your cost
This is the step most people get wrong. You cannot simply choose which purchase to use as your cost basis. HMRC requires you to match the sale in this exact order:
- Same-day acquisitions — any BTC purchased on the same day as the sale
- Acquisitions in the 30 days after the sale — the bed-and-breakfasting rule
- The Section 104 pool — the average cost of all remaining BTC
Full worked example
History: Bought 1 BTC for £20,000 in 2021. Bought 1 BTC for £42,000 in early 2024. Pool: 2 BTC, total cost £62,000, average £31,000.
Sale: Sell 1 BTC for £47,000 in October 2024. No same-day purchase. No repurchase within 30 days. Cost basis from pool: £31,000.
Gain: £47,000 − £31,000 = £16,000. After the £3,000 annual allowance: £13,000 taxable. Tax at 18%: £2,340. Tax at 24%: £3,120.
Step 3: Deduct allowable costs
The following costs are deductible and reduce your gain:
- —Exchange fees paid when you bought the Bitcoin (added to your cost basis)
- —Exchange fees deducted when you sold (reduces your proceeds)
- —Network transaction fees directly attributable to the purchase or sale
Fees are often overlooked but can meaningfully reduce taxable gains, especially for active traders who pay significant exchange commissions.
Step 4: Apply the annual allowance and calculate the tax
Add up all gains (and losses) across all crypto and other capital assets for the year. Deduct losses. If the net gain is below £3,000, no CGT is due — but you may still need to report if proceeds exceed £50,000. Above £3,000, the taxable gain is charged at 18% (basic rate) or 24% (higher/additional rate).
Frequently asked questions
What if I bought Bitcoin on multiple exchanges over many years?
All Bitcoin purchases go into one Section 104 pool regardless of which exchange you used. The average cost includes every purchase ever made. Missing historical buys will make your pool average wrong, which flows through to every future gain calculation.
How do I value Bitcoin received as payment or for services?
Use the GBP market price at the date and time you received it. This becomes both your income for that event and your cost basis for any future CGT calculation when you dispose of it.
Does it matter whether I used GBP or USDT to buy Bitcoin?
For your cost basis, yes. If you bought Bitcoin with USDT (or any non-GBP currency), you need to convert the purchase price to GBP using the exchange rate on the day of purchase. Most exchanges report prices in USD which must be converted to GBP at the correct historical rate.
Can I deduct electricity costs from Bitcoin mining gains?
If your mining activity is treated as a trade, electricity and equipment costs may be deductible against trading income. If it is miscellaneous income, the deductions are more limited. The distinction between hobby mining and trade mining depends on factors like scale, regularity, and commercial intent.
What records do I need to calculate my Bitcoin CGT correctly?
For every transaction: the date, quantity of BTC, GBP value at the time, exchange fees, and the type of event (buy, sell, transfer, reward). You need your complete history from first purchase — not just recent years — because the pool accumulates from day one.
I lost Bitcoin to a scam. Can I claim a capital loss?
Possibly. HMRC allows a negligible value claim if an asset is lost in certain circumstances, including fraud. The process requires evidence of the loss and a formal claim. It is a complex area and professional advice is recommended before making such a claim.
General information only. Consult a qualified adviser for your specific situation.