Crypto Losses and Tax Relief in the UK — How to Claim, Carry Forward, and Offset

Your portfolio is down. A token you bought at £2,000 is worth £400. That DeFi protocol you ape'd into pulled the rug. Your LP position bled out to impermanent loss.

Most people miss this: those losses are worth money. Capital losses reduce your tax bill — but only if you report them correctly. HMRC doesn't apply them automatically. You have to claim them, and the rules for how they offset gains are specific and unforgiving.

This guide covers everything: how crypto losses work under UK tax law, how to carry them forward, how to claim a loss on a worthless token without selling it, and the traps that can silently invalidate your loss. If you have losses sitting in your portfolio, read this before you file.

When does a crypto loss arise?

A capital loss arises when you dispose of a crypto-asset and the proceeds are less than the allowable cost. A disposal means selling, swapping, spending, or removing liquidity — anything where you give up a token in exchange for something else.

If the result is negative, you have a capital loss. Gas fees are an allowable cost — they increase the loss, which is correct. HMRC treats them as incidental costs of disposal.

Worked example: a simple crypto loss

You bought 1 ETH on 15 March 2024 for £2,000. You sold it on 20 November 2024 for £1,500. Gas fee: £8.

That £508 loss can offset £508 of gains elsewhere in the same tax year, or carry forward to future years. But you have to report it — which brings us to the critical point.

Losses are not automatic — you must report them

HMRC does not know about your losses unless you tell them. Capital losses must be reported on your Self Assessment tax return via form SA108 (the capital gains supplementary page). For 2024/25, SA108 has a dedicated crypto section (boxes 13.1–13.8).

There's a time limit: you must report the loss within four years of the end of the tax year in which the loss arose. Miss the deadline, and the loss is gone. You cannot claim it retroactively.

How losses offset gains: same-year vs carry-forward

There are two different regimes, and they work differently.

Same-year losses

Losses that arise in the same tax year as your gains offset those gains fully. There's no floor. If you have £10,000 of gains and £10,000 of losses, your net gain is zero. You don't pay CGT.

Carried-forward losses

Losses that weren't used in the year they arose carry forward indefinitely. But there's a crucial constraint: carried-forward losses can only reduce your net gains down to the annual exempt amount — currently £3,000 for 2024/25 and 2025/26. They cannot reduce it below that.

This is deliberate. HMRC doesn't want you wasting your annual exempt amount when you have old losses available. The exempt amount should absorb the first £3,000 of net gains; carried-forward losses only kick in above that.

Negligible value claims: losses without selling

What if your token went to zero? A rug pull, a dead protocol, a collapsed stablecoin. The token still sits in your wallet, technically, but it's worthless. You can't sell it — there's no liquidity, no buyer, no market.

HMRC allows you to make a negligible value claim. This lets you treat the asset as if you disposed of it at its current (negligible) value, crystallising the loss without an actual sale.

The claim is backdatable — you can elect the disposal to have happened at any time the token was of negligible value, not just the date you submit the claim. This can be useful for placing the loss in a tax year where it offsets the most gains.

The Bed & Breakfast trap: selling and rebuying within 30 days

This is where people accidentally destroy their losses. The 30-day Bed & Breakfast rule states: if you dispose of a token at a loss and reacquire the same token within 30 days, the loss is not crystallised against your Section 104 pool. Instead, the disposal is matched against the reacquisition.

The practical lesson: if you're selling to crystallise a loss, wait 31 days before rebuying the same token. Buy a different token, or simply stay in fiat. The 30-day window is calculated on a calendar-day basis.

DeFi-specific loss scenarios

Losses in DeFi are more complex than "bought high, sold low." Here are the scenarios that trip people up.

Impermanent loss on LP withdrawal

You add 1 ETH and 2,000 USDC to a Uniswap pool. When you withdraw, you receive 0.8 ETH and 2,400 USDC — the pool rebalanced. If the total GBP value of what you received is less than your cost basis (including gas), you have a capital loss. Each leg of the LP position needs to be priced separately at the time of withdrawal. Most tools get this wrong by treating it as a single-asset disposal.

Failed protocols and stuck tokens

If you deposited tokens into a protocol that failed — your aTokens are worthless, your staked position is inaccessible — you may be able to make a negligible value claim. The token still exists in your wallet, but it's functionally worthless. Document the protocol failure and claim accordingly.

Bridged tokens on a dead chain

You bridged ETH to a Layer 2 that subsequently shut down. The bridged tokens are inaccessible. HMRC guidance on this specific scenario is thin, but the principle is the same: if the asset is irrecoverably lost, a negligible value claim is likely appropriate. Keep evidence of the chain's shutdown.

CGT rates: what your losses actually save you

The value of a loss depends on the CGT rate you would otherwise pay. For 2024/25 onwards (from 30 October 2024):

A higher-rate taxpayer with £10,000 of unreported losses is leaving £2,400 on the table. Every year they don't claim, the four-year reporting deadline creeps closer.

How to report crypto losses on your tax return

The mechanics are straightforward once you have the numbers:

1. Calculate every disposal — you need the proceeds (GBP value at disposal), cost basis (GBP value at acquisition, drawn from the S104 pool after same-day and B&B matching), and gas fees.
2. Complete SA108 boxes 13.1–13.8 — Box 13.4 is your total gains, Box 13.5 is your total losses (as a positive number), and Box 13.6 is the net. If losses exceed gains, Box 13.6 shows the net loss.
3. Claim carry-forward — losses not used this year carry forward. Make sure they're declared on your return so HMRC has them on record.
4. Keep your working — HMRC expects you to be able to show how every gain and loss was calculated. That means the matching rule (same-day, B&B, or S104), the price source, and the pool state at the time of disposal.

For a full walkthrough of the Section 104 pool and HMRC's matching rules, see our complete 2024/25 crypto tax guide.

How ChainTax handles losses

ChainTax computes capital gains and losses for every disposal using the full HMRC methodology: same-day matching, 30-day B&B rule, then Section 104 pooling. Gas fees are included as allowable costs automatically.

• Loss carry-forward is computed automatically across tax years — losses that exceed gains in one year carry forward to the next, applied correctly against the annual exempt amount.
• B&B detection — if a disposal is matched against a reacquisition within 30 days, the matching rule is shown in the transaction detail so you can see exactly why your loss was adjusted.
• Multi-leg LP losses — both token legs of a liquidity position are priced separately, giving you the correct combined loss on withdrawal.
• Full working data — every disposal shows the matching rule, S104 pool snapshot, price source, and confidence level. This is your audit trail.

Want to see how a specific transaction was classified? Paste any Ethereum transaction hash into the free transaction explainer — no signup required.