Usamos cookies esenciales para que nuestro sitio funcione y para mejorar la experiencia del usuario, personalizar los anuncios y analizar el tráfico web. Al hacer clic en «Aceptar», aceptas el uso de cookies en nuestro sitio web tal como se describe en nuestra Política de cookies.
The HMRC recognises crypto as an asset which means individuals need to pay capital gains taxes on any profit made on its disposal. To do this, HMRC has defined clear guidelines on how to calculate your crypto taxes in the UK.
In this article, we’ll discuss the laws set by HMRC for calculating your capital gains including Share Pooling, Same Day rule, and 30 Day rule. To learn more about UK taxes, refer to our UK Crypto Tax Guide.
Share pooling, also called share matching, is a UK-specific cost-basis method defined by HMRC to calculate crypto taxes for similar tokens. Instead of calculating the capital gain or loss for individual transactions, the same type of crypto is kept in a ‘pool’ (or section 104 pool).
The cost basis for each crypto token acquired at different points of time goes into the pool to create the ‘pooled allowable cost’. This is used to calculate the capital gains or losses when you sell some of the assets in the pool.
Please note that the HMRC describes NFTs as “separately identifiable” so they are not pooled.
To determine crypto taxes using a share pooling cost basis, you need to consider the following three rules.
When you dispose and acquire tokens on the same day, you will use the average cost basis of all the tokens purchased on that day and the average sale price to calculate your capital gains or loss.
Your cost basis is the average of all the purchases you make on the day The acquired tokens are matched with the disposed of quantity as much as possible to avoid sending them into the section 104 pool.
If the disposed of tokens exceeds the acquired quantity, the excess tokens will be considered for the second rule – the 30 day rule.
Let’s consider an example to understand this better.
Noah acquired 1.2 bitcoin for £7000 in November 2019 and 0.3 bitcoin for £2300 in April 2020.
It is considered that Noah has a single section 104 holding of (1.2+0.3) = 1.5 bitcoin and a total allowable cost of £9300 for the pool.
Average cost basis: 9300/1.5 = £6200/ bitcoin
Now, Noah sells 0.5 bitcoin for £5000 in October 2022. He buys back 0.3 bitcoin on the same day for £2900. Here, the Same Day rule gets applied.
The acquired tokens are matched with the disposed of quantity first and then applied to the shared pool.
Cost basis (of acquired tokens falling under same day rule): £2900
Cost basis (of remaining disposed of tokens): 0.2 * 6200: £1240
Total cost basis (considered for calculating capital gain or loss): £ (2900+ 1240) = £4140
So, the capital gains realized (Selling price - cost basis): £ (5000 - 4140) = £860
When you dispose of tokens and then acquire the same type, in the same quantity within the next 30 days, you will calculate the cost basis of the disposed of tokens using the FIFO method. This is also called the ‘bed and breakfasting’ rule.
This rule prevents investors from using the crypto ‘wash sale’ – where the crypto is sold at a lower price to realize a capital loss but is repurchased to maintain the asset quantity while avoiding crypto taxes.
If the disposal quantity is more than the number of acquired tokens within 30 days, the remaining assets are considered in the section 104 rule.
Let’s use the above example of Noah to understand this.
Noah purchases 1.2 bitcoin for £7000 in November 2019 and 0.3 bitcoin for £2300 in April 2020.
So, Noah has a single section 104 holding of (1.2+0.3) = 1.5 bitcoin and a total allowable cost of £9300 for the pool.
Average cost basis: 9300/1.5 = £6200/ bitcoin
Now, Noah sells 0.5 bitcoin for £5000 in October 2022. He buys back 0.3 bitcoin on the same day for £2900. Here, the Same Day rule gets applied.
The acquired tokens are matched with the disposal quantity before sending the excess to the 30-day rule or the section 104 pool, whichever is applicable.
Cost basis (of acquired tokens falling under same day rule): £2900
However, he also purchases 0.1 bitcoin for £850 10 days later. This transaction falls under the 30 day rule.
Cost basis (of acquired tokens falling under 30 day rule): £850
Cost basis ( of remaining 0.1 bitcoin falling under s104 pool): (0.1 * 6200) = £620
Total cost basis: (2900+850+620) = £4370
So, the capital gains earned by Noah: (5000 - 4370) = £630
Under this rule, you should calculate the cost basis of a given pool of assets using the average cost basis method. This is then used to calculate your capital gains or losses.
The s104 pool is the total of all the crypto assets that doesn’t fall under the same day or 30 day rule. The same crypto assets are considered to be in the same pool.
Here’s the step-by-step process as defined by HMRC:
While the above-stated rules look straightforward, keeping track of multiple transactions for different asset pools can quickly turn complicated.
Kryptos’s crypto tax calculator automatically does this all for you in a matter of minutes.
All you need to do is:
You can view and manage your DeFi portfolio to gain better clarity on your tax position, and generate UK-specific reports that comply with HMRC rules.
To learn more, Sign Up on Kryptos for free now.
1. What is the 30-day rule in crypto?
The 30-day rule applies when you sell crypto and buy the same assets back within 30 days. Here, you will calculate the cost basis of the disposed of tokens using the FIFO method.
2. What is the Section 104 holding rule?
Under this rule, you should calculate the cost basis of a given pool of assets using the average cost basis method. It is then used to calculate your capital gains or losses. The s104 pool is the total of all the crypto assets that don’t fall under the same-day or 30-day rule.
3. What is the same-day crypto rule?
When you dispose of and acquire tokens on the same day, you will use the average cost basis of all the tokens purchased on that day and the average sale price to calculate your capital gains or loss. The disposal crypto amount is matched with the purchased amount to determine gains or losses, before applying the Section 104 holding to the excess tokens.
All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!
| Country | Issue | Kryptos Use Case |
|---|---|---|
| India | Cryptocurrency transactions are taxed as capital gains, with evolving legislation creating uncertainty. | Kryptos.io streamlines the process by automatically tracking transactions and computing capital gains, adjusting to new regulations for precise reporting. |
| Brazil | Cryptocurrencies are subject to capital gains tax and must be reported, posing challenges with complex requirements. | Kryptos.io simplifies compliance by offering real-time transaction tracking and detailed tax calculations, making it easier to meet Brazil’s tax obligations. |
| Nigeria | Regulatory framework for cryptocurrencies is evolving, with uncertainty around taxation and restrictions from the Central Bank. | Kryptos.io provides an adaptable solution by maintaining detailed records and generating flexible reports, helping users stay compliant despite regulatory changes. |
| USA | Cryptocurrency transactions are subject to capital gains tax, with detailed IRS reporting requirements. | Kryptos.io enhances compliance by automating the tracking of transactions and generating comprehensive tax reports, facilitating adherence to IRS requirements. |
| UK | Cryptocurrencies are taxed under both capital gains tax and income tax, requiring careful tracking and reporting. | Kryptos.io aids UK users by monitoring both capital gains and income from crypto transactions, ensuring accurate and straightforward tax reporting. |
| Australia | Cryptocurrencies are subject to capital gains tax, and users must report their gains and losses to the ATO. | Kryptos.io assists Australian users by providing seamless transaction tracking and precise capital gains calculations, ensuring efficient compliance with ATO reporting requirements. |
| Germany | Cryptocurrencies are taxed as private assets with gains subject to tax if held for less than a year. | Kryptos.io supports German users by tracking holding periods and computing taxes on cryptocurrency transactions, ensuring adherence to German tax regulations. |
| Japan | Cryptocurrency gains are treated as miscellaneous income and are subject to high tax rates. | Kryptos.io helps Japanese users by offering a detailed tracking system and calculating taxes on miscellaneous income, efficiently managing high tax obligations. |
| Scenario | Description | Kryptos Features that can be of aid |
|---|---|---|
| Multiple Exchanges and Wallets | Consolidating records from various exchanges and wallets to maintain a comprehensive overview of crypto activities. | Seamless integration with numerous exchanges and wallets, automatic import, and consolidation of records. |
| International Transactions | Managing records for cross-border transactions, including currency conversions and compliance with international tax laws. | Support for multiple currencies, efficient management of cross-border activities, accurate currency conversion for reporting. |
| Complex Transactions | Handling trades, swaps, staking, lending, and other sophisticated crypto activities. | Advanced tracking, reporting, and documentation for various transaction types. Kryptos' DeFi and NFT modules offer specialized tools for managing decentralized finance and NFT activities, ensuring precise records and comprehensive oversight. |
As Web3 evolves, managing a diverse portfolio has become complex. Kryptos simplifies this with advanced tools for real-time tracking, NFT management, and DeFi analytics. Discover how Kryptos turns challenges into strategic advantages for modern investors.
Struggling with crypto tax in Australia? Kryptos.io simplifies the process, ensuring accurate and compliant filings with the ATO. Track transactions and value assets effortlessly—make tax season stress-free.
Mastering Crypto Taxation: Navigate the Complex World of Digital Assets with Kryptos, the Ultimate Solution for Accurate, Efficient, and Future-Proof Tax Reporting.
The HMRC recognises crypto as an asset which means individuals need to pay capital gains taxes on any profit made on its disposal. To do this, HMRC has defined clear guidelines on how to calculate your crypto taxes in the UK.
In this article, we’ll discuss the laws set by HMRC for calculating your capital gains including Share Pooling, Same Day rule, and 30 Day rule. To learn more about UK taxes, refer to our UK Crypto Tax Guide.
Share pooling, also called share matching, is a UK-specific cost-basis method defined by HMRC to calculate crypto taxes for similar tokens. Instead of calculating the capital gain or loss for individual transactions, the same type of crypto is kept in a ‘pool’ (or section 104 pool).
The cost basis for each crypto token acquired at different points of time goes into the pool to create the ‘pooled allowable cost’. This is used to calculate the capital gains or losses when you sell some of the assets in the pool.
Please note that the HMRC describes NFTs as “separately identifiable” so they are not pooled.
To determine crypto taxes using a share pooling cost basis, you need to consider the following three rules.
When you dispose and acquire tokens on the same day, you will use the average cost basis of all the tokens purchased on that day and the average sale price to calculate your capital gains or loss.
Your cost basis is the average of all the purchases you make on the day The acquired tokens are matched with the disposed of quantity as much as possible to avoid sending them into the section 104 pool.
If the disposed of tokens exceeds the acquired quantity, the excess tokens will be considered for the second rule – the 30 day rule.
Let’s consider an example to understand this better.
Noah acquired 1.2 bitcoin for £7000 in November 2019 and 0.3 bitcoin for £2300 in April 2020.
It is considered that Noah has a single section 104 holding of (1.2+0.3) = 1.5 bitcoin and a total allowable cost of £9300 for the pool.
Average cost basis: 9300/1.5 = £6200/ bitcoin
Now, Noah sells 0.5 bitcoin for £5000 in October 2022. He buys back 0.3 bitcoin on the same day for £2900. Here, the Same Day rule gets applied.
The acquired tokens are matched with the disposed of quantity first and then applied to the shared pool.
Cost basis (of acquired tokens falling under same day rule): £2900
Cost basis (of remaining disposed of tokens): 0.2 * 6200: £1240
Total cost basis (considered for calculating capital gain or loss): £ (2900+ 1240) = £4140
So, the capital gains realized (Selling price - cost basis): £ (5000 - 4140) = £860
When you dispose of tokens and then acquire the same type, in the same quantity within the next 30 days, you will calculate the cost basis of the disposed of tokens using the FIFO method. This is also called the ‘bed and breakfasting’ rule.
This rule prevents investors from using the crypto ‘wash sale’ – where the crypto is sold at a lower price to realize a capital loss but is repurchased to maintain the asset quantity while avoiding crypto taxes.
If the disposal quantity is more than the number of acquired tokens within 30 days, the remaining assets are considered in the section 104 rule.
Let’s use the above example of Noah to understand this.
Noah purchases 1.2 bitcoin for £7000 in November 2019 and 0.3 bitcoin for £2300 in April 2020.
So, Noah has a single section 104 holding of (1.2+0.3) = 1.5 bitcoin and a total allowable cost of £9300 for the pool.
Average cost basis: 9300/1.5 = £6200/ bitcoin
Now, Noah sells 0.5 bitcoin for £5000 in October 2022. He buys back 0.3 bitcoin on the same day for £2900. Here, the Same Day rule gets applied.
The acquired tokens are matched with the disposal quantity before sending the excess to the 30-day rule or the section 104 pool, whichever is applicable.
Cost basis (of acquired tokens falling under same day rule): £2900
However, he also purchases 0.1 bitcoin for £850 10 days later. This transaction falls under the 30 day rule.
Cost basis (of acquired tokens falling under 30 day rule): £850
Cost basis ( of remaining 0.1 bitcoin falling under s104 pool): (0.1 * 6200) = £620
Total cost basis: (2900+850+620) = £4370
So, the capital gains earned by Noah: (5000 - 4370) = £630
Under this rule, you should calculate the cost basis of a given pool of assets using the average cost basis method. This is then used to calculate your capital gains or losses.
The s104 pool is the total of all the crypto assets that doesn’t fall under the same day or 30 day rule. The same crypto assets are considered to be in the same pool.
Here’s the step-by-step process as defined by HMRC:
While the above-stated rules look straightforward, keeping track of multiple transactions for different asset pools can quickly turn complicated.
Kryptos’s crypto tax calculator automatically does this all for you in a matter of minutes.
All you need to do is:
You can view and manage your DeFi portfolio to gain better clarity on your tax position, and generate UK-specific reports that comply with HMRC rules.
To learn more, Sign Up on Kryptos for free now.
1. What is the 30-day rule in crypto?
The 30-day rule applies when you sell crypto and buy the same assets back within 30 days. Here, you will calculate the cost basis of the disposed of tokens using the FIFO method.
2. What is the Section 104 holding rule?
Under this rule, you should calculate the cost basis of a given pool of assets using the average cost basis method. It is then used to calculate your capital gains or losses. The s104 pool is the total of all the crypto assets that don’t fall under the same-day or 30-day rule.
3. What is the same-day crypto rule?
When you dispose of and acquire tokens on the same day, you will use the average cost basis of all the tokens purchased on that day and the average sale price to calculate your capital gains or loss. The disposal crypto amount is matched with the purchased amount to determine gains or losses, before applying the Section 104 holding to the excess tokens.
All content on Kryptos serves general informational purposes only. It's not intended to replace any professional advice from licensed accountants, attorneys, or certified financial and tax professionals. The information is completed to the best of our knowledge and we at Kryptos do not claim either correctness or accuracy of the same. Before taking any tax position / stance, you should always consider seeking independent legal, financial, taxation or other advice from the professionals. Kryptos is not liable for any loss caused from the use of, or by placing reliance on, the information on this website. Kryptos disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Thank you for being part of our community, and we're excited to continue guiding you on your crypto journey!
As Web3 evolves, managing a diverse portfolio has become complex. Kryptos simplifies this with advanced tools for real-time tracking, NFT management, and DeFi analytics. Discover how Kryptos turns challenges into strategic advantages for modern investors.
Struggling with crypto tax in Australia? Kryptos.io simplifies the process, ensuring accurate and compliant filings with the ATO. Track transactions and value assets effortlessly—make tax season stress-free.
Mastering Crypto Taxation: Navigate the Complex World of Digital Assets with Kryptos, the Ultimate Solution for Accurate, Efficient, and Future-Proof Tax Reporting.
