HMRC's Cryptoassets Manual (CRYPTO10100) treats exchange tokens — Bitcoin, Ether and similar — as a form of intangible property, not as currency or money. That classification means Capital Gains Tax, not foreign exchange rules, governs profits. Six events trigger a CGT disposal: selling crypto for sterling, exchanging one token for another, using crypto to buy goods or services, gifting crypto to anyone other than a spouse or civil partner, receiving compensation from a lost or stolen wallet, and transferring tokens to a trust. Each disposal requires the taxpayer to compute the pound-sterling market value at the transaction date, which HMRC expects to be sourced from a reputable exchange and documented.
HMRC confirmed in its June 2023 guidance update that non-fungible tokens (NFTs) fall within the same CGT framework as exchange tokens, though DeFi lending and staking may also generate income tax charges — a distinction covered in Module 3. Where a disposal produces a loss, it can be offset against gains in the same tax year or carried forward indefinitely under the Taxation of Chargeable Gains Act 1992 (TCGA 1992), section 2A, provided the loss is reported to HMRC within four years of the end of the relevant tax year.
Vectara's sole director purchased 1.5 BTC on 10 March 2022 for £48,000 (£32,000 per coin) and disposed of all 1.5 BTC on 14 November 2024 for £84,000 (£56,000 per coin). Allowable acquisition cost: £48,000. Disposal proceeds: £84,000. Gain before AEA: £36,000. Less 2024/25 AEA: £3,000. Taxable gain: £33,000. At the higher rate of 24%, the CGT liability equals £7,920. Had the director been a basic-rate taxpayer, the liability would be £5,940 at 18%.
⚠️Treating crypto-to-crypto swaps as non-taxable
→ Every token-for-token exchange is a disposal under TCGA 1992 s.21; use the sterling market value of the token received on the exchange date as the disposal proceeds.
⚠️Omitting small-value transactions from Self Assessment
→ Even if total gains are below the AEA, disposals totalling more than four times the AEA (£12,000 for 2024/25) must be reported on the Capital Gains supplementary pages of SA100.
⚠️Using purchase price in a foreign currency without converting
→ All figures must be translated to GBP at the spot rate on the date of the transaction; HMRC accepts daily HMRC exchange rates published at gov.uk/government/collections/exchange-rates-for-customs-and-vat.