📝 Description
Learn how cryptocurrency losses are calculated and used to reduce your Capital Gains Tax liability in the United Kingdom through HMRC loss relief rules.
⚠️ Warnings
To use allowable losses in future tax years, you must report them to HMRC within 4 years of the tax year in which they occurred.
Unreported losses after the 4-year deadline cannot be claimed or carried forward.
⚖ How Crypto Loss Relief works
Crypto losses can be used to reduce the tax you pay on future gains. This process is known as loss relief. If you sell cryptocurrency for less than its cost basis, you generate a capital loss.
Example of a Capital Loss:
Transaction | Amount |
Purchase price | £5,000 |
Sale price | £3,000 |
Loss | £2,000 |
This £2,000 loss can be used to offset gains from other cryptocurrency investments.
Using losses in the same tax year
Capital losses are first used to reduce capital gains realized within the same tax year.
Example:
Category | Amount |
Gains | £8,000 |
Losses | £2,000 |
Net gain | £6,000 |
The annual tax-free allowance is then applied to the remaining net gain.
Carrying losses forward
If your total losses exceed your total gains in a given tax year, the remaining unused losses can be carried forward indefinitely to offset future gains.
Example:
Year | Result |
2025 gains | £3,000 |
2025 losses | £10,000 |
Unused losses | £7,000 |
These £7,000 of unused losses can be carried forward to offset taxable gains in future tax years.
💡 Recommendations
Keep accurate records of all your loss-making transactions across all wallets, exchanges, and platforms.
Report all allowable losses to HMRC on your Self Assessment tax return or via your Personal Tax Account within the strict 4-year deadline to preserve your loss relief rights.