Negligible Value Claims: Tax Relief for Worthless Crypto

Most crypto portfolios accumulate wreckage. The memecoin that rugged six weeks after launch. The governance token of a project that quietly shut down. The “next big thing” that got delisted from every exchange and now trades nowhere at all. You paid real money for these tokens, they are worth nothing, and they sit in your wallet because selling them is impossible or pointless.

Here is what most UK investors don't know: HMRC lets you claim the capital loss on a token that has become worthless without selling it. It is called a negligible value claim, it is set out in section 24(2) of the Taxation of Chargeable Gains Act 1992, and it can reduce this year's Capital Gains Tax bill or bank a loss to carry forward. Most crypto tax tools never mention it, because spotting a dead token in a portfolio takes evidence a spreadsheet doesn't have.

The flip side matters just as much: a negligible value claim has strict conditions, and claiming one you aren't entitled to is a compliance problem, not a tax strategy. This guide covers what qualifies, what doesn't, how backdating works, and how to record a claim properly — including the cases where the honest answer is “you have no claim”.

What a negligible value claim actually is

Section 24(2) TCGA 1992 says that where the owner of an asset which has become of negligible value makes a claim, the Act applies “as if the claimant had sold, and immediately reacquired, the asset… for a consideration of an amount equal to the value specified in the claim”. In plain English: you keep the token, but for tax purposes you are treated as having disposed of it — usually for nil — and bought it straight back at that value. The disposal crystallises the capital loss; the notional reacquisition resets your cost basis to the claim value.

“Negligible” is not defined in the legislation. HMRC's Capital Gains Manual (CG13125) takes the view that it means “worth next to nothing”. A token that has fallen 80% is not of negligible value — it is just down badly. A token whose project has shut down, whose liquidity has been pulled, and which no market will price is the territory the claim was built for.

There is no deadline for making the claim itself — HMRC confirms there is no requirement to claim within a specified time of the asset becoming worthless. But the capital loss the claim crystallises must still be notified to HMRC within the normal four-year window, so sitting on a dead token for years can quietly cost you the relief.

The conditions HMRC sets

Four conditions do the real work, and each one knocks out a category of hopeful claims:

1. The token became worthless while you held it. An asset that was already of negligible value when you acquired it cannot support a claim. You need to have paid something meaningful for it (or acquired it at a real market value) and watched that value collapse to nothing during your ownership.
2. The asset must still exist — and you must still hold it. CG13125 is explicit: if the asset has ceased to exist, the claim fails. For tokens this is rarely the blocker (a contract keeps existing even after the project dies), but you do need to still hold the tokens when you make the claim. If you already sold or sent them away, that was an ordinary disposal instead.
3. The claim covers your whole holding of that token. HMRC's Cryptoassets Manual (CRYPTO22500) requires the claim to be made in respect of the whole Section 104 pool, not individual tokens. You cannot claim on half your bag and keep the other half at full cost basis.
4. HMRC may ask for evidence.The claim must state the asset, the deemed disposal value (potentially £nil), and the deemed disposal date. Keep a record of what happened — the project's shutdown announcement, the liquidity removal, the delisting — because “it went to zero” is a conclusion, not evidence.

What doesn't qualify — and why tools shouldn't pretend otherwise

This is where honesty matters more than optimism, because three of the most common “worthless token” situations fail the conditions above:

• Spam airdrops.The junk tokens that arrive unsolicited in every active wallet usually have a cost basis of nil — you paid nothing for them. No cost basis means no loss to crystallise, and a token that was already worthless when it arrived fails the became-worthless-while-held condition anyway. (How airdrops get a cost basis in the first place is its own topic — see our airdrop tax guide.)
• Stolen or drained tokens.HMRC does not consider theft to be a disposal — you still own the stolen asset and have a right to recover it (CRYPTO22450). A wallet-drainer attack is not a negligible value claim; whether any relief is available depends on the specific facts and deserves manual review, not automation.
• Lost private keys.Losing your keys is not a disposal either — the tokens still exist on-chain (CRYPTO22400). HMRC accepts a negligible value claim may be possible where recovery is genuinely impossible, but the evidence burden is human and personal: no software can verify you really lost the only copy.

A tax tool that auto-claims losses on every dead-looking token in your wallet is manufacturing claims you would have to defend. The correct behaviour — and the one ChainTax implements — is to surface the evidence and let you decide. When we ran our own detection over our founders' wallets, it found zero qualifying candidates: every held token still had live market value. That is the engine working correctly. A detector that never says “no claim here” isn't detecting anything.

Backdating: the two-year window and its trap

By default the deemed disposal happens on the date of the claim. But s.24(2)(b) lets you specify an earlier date if all three of these hold:

1. you owned the asset at that earlier time;
2. it had already become of negligible value by that earlier time; and
3. the earlier date is not more than two years before the beginning of the tax year in which you make the claim.

Backdating matters because it moves the loss into an earlier tax year — useful if you had large gains in that year that the loss can offset. If you make a claim to HMRC during 2026/27, the earliest deemed disposal date you can specify is 6 April 2024.

The trap is in when the window is measured. The two years run back from the tax year in which the claim is actually made to HMRC — normally the year you file the Self Assessment return containing it — not the year you decided to claim. Record a backdated claim near a tax-year boundary and then file the return after 5 April, and the earlier date can fall out of the window entirely. If you are backdating close to the limit, file in the same tax year.

Worked example — a rugged memecoin (illustrative)

The numbers below are an illustration, not a real user's claim — every real claim turns on its own facts and evidence.

The claim also resets the pool: after the deemed disposal and reacquisition at £0, the 500,000 MEME still sitting in the wallet carry a nil cost basis. If the project somehow revives and the tokens are sold later, the whole sale price would be a gain — the loss relief isn't free money, it is timing.

Making the claim: two steps, one return

A detail that catches people out: recording the deemed disposal and telling HMRC about it are distinct steps.

The claimitself is made to HMRC — normally on your Self Assessment return — stating the asset, the value of the deemed disposal, and the date. The capital loss must be separately notified (CG13125), which in practice happens on the same return: the deemed disposal goes through your SA108 crypto boxes like any other disposal, and the loss either offsets the year's gains or carries forward. Our guide to claiming crypto losses covers the loss-relief mechanics — including the four-year notification window that still applies to the crystallised loss.

How ChainTax handles negligible value claims

1. Detection with evidence, not vibes.The engine scores every token you still hold that carries real cost basis against worthlessness signals: community spam-list membership, a live price of exactly zero, disappearance from price sources, and price collapse of more than 99.5% against your average cost. Only strong candidates are surfaced — a token that merely crashed doesn't qualify, so it doesn't nag you.
2. Spam airdrops are structurally excluded.Tokens with no cost basis have no loss to claim, so they never appear as candidates — the same rule that makes HMRC reject the claim makes our detector skip it.
3. Nothing is ever claimed automatically.Candidates appear on a review card with the evidence laid out. Recording a claim requires you to open the guided flow and confirm the statutory conditions yourself — that the token became worthless while you held it, and that you still hold it.
4. Whole-pool enforcement and backdating checks are built in.The claim always covers your entire holding (CRYPTO22500) — there is no way to enter partial units — and a backdated date is validated against the two-year window with the required attestations. The deemed disposal is recorded as Disposal at high confidence, flows through Section 104 matching, and lands in your report and SA108 figures with a full statutory-wording section in the PDF.
5. Cleanly reversible.A recorded claim can be deleted in one click and your figures recompute exactly as before — no residue.

One more honesty note: this treatment is built on primary-source research — the statute and HMRC's published manuals — and is flagged for review at our next accountant engagement, like every tax position we ship. If your claim is large or unusual, take professional advice before filing.