Glossary
Crypto tax terms explained.
Plain English definitions of the terms you will encounter when dealing with HMRC and crypto tax.
3
30-day rule
HMRC's anti-avoidance rule: if you sell a crypto asset and repurchase the same asset within 30 days, the sale is matched against the repurchase rather than the pool. This limits the ability to crystallise losses artificially.
A
Acquisition cost
The amount you paid to acquire a crypto asset, including any fees. This is used to calculate your gain when you later dispose of it.
Airdrop
Free tokens sent to your wallet, typically as a marketing exercise or protocol reward. Whether an airdrop is taxable depends on whether you received it in exchange for something.
Allowable cost
Costs that HMRC permits you to deduct when calculating your capital gain. Includes the acquisition price and transaction fees paid when buying or selling.
Annual exempt amount (CGT allowance)
The amount of capital gains you can make each tax year without paying tax. For 2024/25 onwards, this is £3,000 per individual.
B
Bed and breakfasting
The practice of selling an asset to realise a gain or loss and immediately buying it back. HMRC's 30-day rule prevents this from being used to manipulate tax positions.
C
Capital Gains Tax (CGT)
Tax on the profit you make when you dispose of an asset that has increased in value. For crypto, basic rate taxpayers pay 18%; higher rate taxpayers pay 24% (from 2024/25).
Chargeable gain
The taxable portion of a capital gain — your total gain minus any allowable costs and any available losses or allowances.
Cost basis
What you paid for a crypto asset, which determines your profit (gain) when you sell it. For HMRC purposes, cost basis is calculated using the section 104 pool method.
Cryptoasset
HMRC's term for what most people call cryptocurrency. Includes Bitcoin, Ether, tokens, NFTs, and other blockchain-based assets.
D
DeFi (Decentralised Finance)
Financial services built on blockchain protocols, including lending, borrowing, liquidity provision, and yield farming. The tax treatment of DeFi transactions is complex and evolving.
Disposal
Any transaction where you give up ownership of a crypto asset. Includes selling, swapping, spending, and gifting. Moving between your own wallets is not a disposal.
E
Exchange token
HMRC's term for cryptocurrencies like Bitcoin and Ether that are used primarily as a means of exchange or store of value.
G
Gain
The profit on a disposal — the difference between your disposal proceeds and your allowable costs. A negative gain is a loss.
H
Hard fork
A protocol change that creates a new cryptocurrency. HMRC treats new tokens received in a hard fork differently depending on whether work was done to receive them.
HMRC
Her Majesty's Revenue and Customs — the UK's tax authority. Responsible for collecting taxes including CGT and Income Tax on crypto gains and income.
I
Income Tax
Tax on earnings, including certain crypto received as income. Applies to staking rewards, mining income, and some airdrops at your marginal rate (20%, 40%, or 45%).
L
Loss
When a disposal produces a negative gain — i.e. you sold for less than you paid. Losses can be offset against gains in the same tax year, or carried forward to future years.
Loss relief
Using realised losses to reduce your taxable gains. You must claim the loss on your Self Assessment — it is not applied automatically.
M
Mining
Receiving crypto as a reward for processing transactions on a proof-of-work blockchain. Generally treated as income at the market value on the date received.
N
NFT (Non-Fungible Token)
A unique digital asset on a blockchain. For HMRC, buying and selling NFTs is treated similarly to other cryptoassets — disposals trigger CGT.
P
Pool
Short for section 104 pool. The running average cost of all your purchases of a particular crypto asset.
Proceeds
The amount you receive when you dispose of a crypto asset — in GBP at the time of the transaction. For swaps, this is the market value of the asset you received.
S
SA108
The Capital Gains Summary supplementary page for HMRC's Self Assessment tax return. This is where you report your crypto gains and losses.
Same-day rule
HMRC's first matching rule: sales of a crypto asset must be matched against purchases of the same asset on the same day before any other matching takes place.
Section 104 pool
HMRC's required method for tracking the cost basis of crypto assets. All purchases of the same asset are pooled into a single average cost. When you sell, you reduce the pool proportionately.
Self Assessment
The HMRC system for reporting income and gains that are not taxed at source. If you have crypto gains above the annual exempt amount, you typically need to complete a Self Assessment return.
Soft fork
A backward-compatible update to a blockchain protocol. Generally does not create a taxable event on its own.
Staking
Locking up crypto to participate in a proof-of-stake network and receive rewards. HMRC generally treats staking rewards as income at the market value when received.
T
Tax year
The UK tax year runs from 6 April to 5 April the following year. For example, the 2024/25 tax year runs from 6 April 2024 to 5 April 2025.
Tax-loss harvesting
Selling assets at a loss to offset gains elsewhere in your portfolio. A legal strategy in the UK, but limited by the 30-day rule (you cannot immediately repurchase the same asset).
Transfer
Moving crypto between wallets or accounts that you own. Not a disposal, and therefore not a taxable event — but you need to be able to prove you own both addresses.
U
Utility token
A token that gives the holder access to a specific product or service on a blockchain platform. Taxed similarly to other cryptoassets.