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Key content is provided below in British English. The article follows the required structure, headings and tone.
Key takeaways: what to know in one minute
- HMRC treats most crypto-to-crypto swaps as disposals for Capital Gains Tax (CGT) — value at the time of the swap determines the proceeds.
- Converting to fiat does not avoid CGT; whether swapping to another token or to GBP, a disposal event can arise and gains are taxable.
- Matching rules (same-day, 30-day, section 104 pooling) can materially change the base cost used and therefore the gain or loss — timing matters.
- Exchange-rate and valuation choices affect base cost: using reliable market prices and consistent time stamps reduces risk in an HMRC enquiry.
- Poor records and incorrectly treated DEX/DeFi fees are common costly mistakes; accurate exportable transaction histories are essential.
Crypto-to-Crypto swaps vs fiat conversion: CGT pitfalls is answered precisely in each section below with worked examples, step-by-step reporting notes and a practical checklist.
Should I treat crypto-to-crypto as a disposal for CGT?
HMRC guidance makes the position clear for most individuals: exchanging one cryptoasset for another usually counts as a disposal for CGT. The key test is whether the transaction ends ownership of one asset and creates another. For disposals, the taxable gain is the difference between the disposal proceeds (market value of the asset received) and the allowable base cost of the asset given up.
Relevant HMRC pages: Tax on cryptoassets (HMRC) and the Cryptoassets Manual: Cryptoassets Manual (HMRC).
Notes and quick clarifications:
- Stablecoins are normally treated as cryptoassets, not fiat, for CGT purposes unless some other law treats them as currency — do not assume stablecoin = GBP.
- Income tax (staking, mining) is separate; this guide focuses exclusively on disposals for CGT.
When does HMRC view swaps as taxable disposals?
HMRC regards a disposal where there is a change in ownership of the asset. Typical taxable disposal events include:
- Exchanging one crypto token for another (e.g. BTC → ETH).
- Selling crypto for fiat (e.g. BTC → GBP).
- Using crypto to pay for goods or services (unless treated as income in other contexts).
- Gifting crypto (potentially a disposal at market value for CGT).
Exceptions and borderline cases:
- Internal exchange platform conversions that do not transfer ownership between distinct wallets still count as disposals if there is a change in the asset recorded in an account owned by the taxpayer.
- Transfers between personal wallets or between the same person’s accounts are not disposals provided ownership remains the same and no third party is involved — keep records showing continuity of ownership and wallet addresses.
Practical warning: decentralised exchange (DEX) swaps commonly trigger disposals because tokens leave one address and another token arrives; treat them as disposals and record market values at the exact timestamp.
Crypto-to-crypto swaps vs fiat conversion: which reduces CGT?
Short answer: neither reliably reduces CGT on its own. The tax position depends on the values and the base costs involved. Examples show why timing, matching rules and use of pooling matter.
Example 1 — basic numeric comparison:
- Purchase 1 BTC on 1 Jan 2024 at £10,000 (base cost £10,000).
- On 1 June 2024 BTC is worth £20,000. Two choices:
- A: Swap 1 BTC → 10 ETH where market value of 10 ETH = £20,000.
- B: Convert 1 BTC → GBP for £20,000, hold GBP.
Tax outcome on 1 June 2024 for both A and B:
- Disposal proceeds = £20,000. Base cost = £10,000. Gain = £10,000 (less annual exempt amount and any allowable costs). Same tax result whether swapped to ETH or converted to GBP.
Why might outcomes differ in practice?
- Future disposals: if ETH acquired in A later appreciates or falls, the base cost for the acquired ETH is the market value at the swap (£20,000). If this ETH is later sold for less than £20,000, an allowable loss arises.
- Matching rules: if the taxpayer performs several rapid trades, same-day or 30‑day matching rules can alter which acquisition matches which disposal — this can change which base cost applies and therefore the taxable gain.
Example 2 — where swapping can produce an allowable loss sooner:
- Buy 100 ABC tokens at £1,000 total (base cost £1,000).
- Swap ABC for DEF tokens when ABC market value = £200 (disposal proceeds £200). Loss = £800, usable against gains.
- If converting ABC to GBP first and then buying DEF later, the timings and pooling rules may result in different matching and potential loss recognition delays.
Conclusion: the taxable result depends on market values, timing and matching rules rather than the mere fact of swapping or converting to fiat.
How exchange rates affect base cost and CGT
Key principles:
- Use market value at the exact time of disposal to determine proceeds. For swaps, the proceeds equal the market value in GBP of the token received at disposal time.
- Base cost of the asset received is the same market value used as proceeds — this prevents double-taxation but fixes the base cost for future disposals.
- For cross-exchange or cross-jurisdiction transactions, use a reliable exchange rate source and document it (time-stamped price feed, exchange tick, or reputable aggregator).
Practical rules and common pitfalls:
- Do not mix exchange-rate sources without explanation; cite the same provider or a defensible method when reconstructing long histories.
- For DEX swaps where no clear GBP price exists, derive GBP value via a common pair (e.g. token→ETH→GBP) using contemporaneous rates and record the method.
- Fees paid in token reduce the proceeds or increase the base cost depending on how they are charged — document token-denominated fees and their GBP value at the time incurred.
Worked calculation (swap via intermediary pair):
- Swap 100 TOKENA → 2 ETH on 10 March at 09:15 UTC.
- ETH price at 09:15 UTC = £9,500. => 2 ETH = £19,000 (disposal proceeds).
- Base cost of TOKENA is the original acquisition cost (e.g. £12,000).
- Capital gain = £19,000 - £12,000 = £7,000 (before reliefs and fees).
- New base cost for ETH = £19,000.
Costly record-keeping mistakes for crypto-to-crypto trades
Common errors that increase tax bills or cause enquiries:
- Missing time stamps or using inconsistent time zones. Always use UTC.
- Failing to record GBP equivalent values at disposal and acquisition times.
- Ignoring fees or treating token-paid fees as zero cost. Fees denominated in tokens must be valued in GBP at the time and accounted for when computing proceeds or costs.
- Not tracking wallet-to-wallet transfers and mixing them with disposals.
- Relying on exchange CSV exports without verifying they include internal transfers, staking rewards, or chain fees.
Recommended record fields for every transaction:
- Date and time (UTC)
- Wallet/exchange addresses involved
- Asset disposed and asset received
- Quantity and unit price in asset and GBP
- Fee amount (asset, GBP equivalent) and who paid it
- Transaction ID / tx hash
- Balances before and after (to reconcile pooling)
Tooling tip: export full transaction history from custodial exchanges and on‑chain providers (use APIs with consistent time windows). Save backups in non-editable formats (CSV, PDF) and maintain working spreadsheets for calculations.
Can swaps create allowable losses for CGT relief?
Yes. If the disposal proceeds (GBP value of tokens received) are less than the allowable base cost of the asset given up, a capital loss arises. That loss can be:
- Used in the same tax year against other gains.
- Carried forward to offset future capital gains (if registered with HMRC via the Self Assessment process when required).
Practical considerations:
- Loss recognition depends on correct matching and pooling. A 30‑day rule or same‑day matching may bind certain disposals to recent acquisitions and change which acquisition cost is matched to the disposal.
- For small losses created by a swap, keep records to claim them; HMRC requires supporting documentation for carried-forward losses.
- Do not deliberately create 'washing' transactions to produce artificial losses; anti-avoidance provisions may apply.
How the UK matching rules change outcomes: same-day, 30‑day and section 104 pooling
A short, practical primer:
- Same-day rule: disposals are matched to acquisitions on the same day first.
- 30‑day rule: if no same-day acquisition exists, acquisitions in the 30 days following the disposal are matched next.
- Section 104 pooling: remaining acquisitions are pooled to create an average base cost per asset held.
Example where matching matters:
- Acquire 1 BTC at £10,000 on 1 Jan.
- Acquire another 1 BTC at £12,000 on 2 Jan.
- Dispose of 1 BTC at £11,000 on 2 Jan.
Matching:
- Same-day acquisitions on 2 Jan are matched first (disposal matched to 1 BTC at £12,000) => loss £1,000.
- If same-day had not existed, pooling would use average cost ( (10,000 + 12,000) / 2 = £11,000 ) producing nil gain.
Practical implication: rapid trades within 30 days can create materially different outcomes depending on the order and timing of trades.
Practical comparison table: swap vs fiat conversion (typical scenarios)
| Scenario |
Disposal recognised? |
Proceeds in GBP |
Base cost for new holding |
Typical tax outcome |
| Swap BTC → ETH when BTC up |
Yes |
GBP value of ETH received |
GBP value used as proceeds |
Gain/loss based on difference to BTC base cost |
| BTC → GBP sale |
Yes |
GBP amount received |
GBP held (no crypto base cost) |
Same gain/loss as swap if same market values |
| Small instant swap with fee paid in token |
Yes |
GBP value net of fee (if fee reduces quantity received) |
Net GBP value becomes base for received token |
Fees reduce proceeds or increase costs — affects gain |
| Transfer BTC wallet A → wallet B (same owner) |
No (if ownership unchanged) |
N/A |
N/A |
No CGT, but keep transfer records |
Info flow: quick process for treating a swap correctly
Swap processing: valuation and records
🔍 Step-by-step
1️⃣ **Record disposal**: timestamp, asset given, asset received, quantities
2️⃣ **Value in GBP**: capture reliable exchange rate at that timestamp
3️⃣ **Compute gain/loss**: proceeds (GBP) − allowable base cost (GBP)
4️⃣ **Set new base cost**: the GBP value of asset received becomes its base cost
Analysis: advantages, risks and common errors
✅ Benefits / when swapping might be sensible
- Immediate repositioning within crypto markets without converting to fiat.
- Locking a new base cost on the asset received which can be beneficial if the new asset is expected to fall (recognising a loss) or if tax planning for a later tax year is required.
- Operational convenience for DeFi strategies where fiat corridors are impractical.
⚠️ Errors to avoid / risks
- Assuming stablecoins equal fiat: stablecoins typically remain cryptoassets for CGT.
- Bad valuation practice: using inconsistent price sources or failing to value tokens traded on low-liquidity markets.
- Ignoring DEX specifics: slippage, liquidity pool tokens and AMM fees complicate valuation — always compute GBP equivalents for token‑denominated fees.
- Poor matching awareness: failing to consider same-day or 30‑day matching can create unexpected tax bills.
How to report swaps on the Self Assessment (SA108)
Step-by-step essentials:
- Collate all disposals during the tax year with GBP values.
- Compute total gains and losses per asset class using matching rules; aggregate allowable losses to set against gains.
- Complete the Capital Gains pages (SA108) with totals, include details if needed and retain transaction-level evidence.
Useful HMRC help: Self Assessment (HMRC) and the SA108 guidance on the HMRC site.
(If a HowTo schema is required, this article includes a short how-to for reporting in the schemas section.)
Frequently asked questions
Should I always report every crypto-to-crypto swap?
Yes. Every disposal must be reported if it contributes to a net gain above the annual exempt amount or if an SA return is otherwise required.
Are stablecoins treated as fiat for CGT?
Not automatically. Stablecoins are usually treated as cryptoassets; assess on a facts-and-circumstances basis and do not assume they are GBP.
How should DEX fees paid in token be recorded?
Record the token fee and its GBP value at the time the fee was incurred. That GBP value affects proceeds or costs depending on whether it reduces the quantity received or is an acquisition expense.
Can an exchange provide sufficient evidence for valuations?
Often yes, but keep backups: screenshots, API export, and a clear audit trail with time stamps improve robustness under enquiry.
What to do if records are incomplete?
Reconstruct values from reliable market feeds, note the method and retain evidence. Consider professional help for material gaps.
Your next step:
- Export transaction histories (CSV + on-chain tx hashes) and secure a copy.
- Reconcile trades against a single price source per tax year and compute GBP equivalents for every disposal.
- If gains or losses are non-trivial, prepare SA108 figures or consult a specialist adviser experienced in crypto taxation.
Alan White
With over 12 years of experience guiding individuals and businesses through cryptocurrency taxation in the UK, this author provides practical, real-world advice on managing crypto taxes confidently. Covering everything from Bitcoin tax basics and HMRC compliance to strategies, case studies, and tools, every article on Bitcoin Tax UK is designed to give readers clear guidance, actionable steps, and trusted insights. The goal is to empower users to navigate crypto taxation safely, efficiently, and with confidence.