Are there doubts about how swaps and derivatives with cryptocurrencies trigger UK tax liabilities or how to report them to HMRC? This guide provides precise rules, worked examples and a clear checklist to determine when a crypto-to-crypto swap, perpetual, option or CFD becomes a taxable disposal and how to calculate gains for Capital Gains Tax (CGT) or income tax purposes.
Key takeaways: what to know in 1 minute
- Crypto-to-crypto swaps are normally disposals for Capital Gains Tax: swapping one asset for another usually triggers a disposal on which a gain or loss must be calculated. Exceptions are narrow.
- Derivatives can be taxed differently depending on structure: cash‑settled derivatives, CFDs and margin trading often give rise to income tax for frequent trading or business-like activity; physically settled derivatives tend to produce CGT events.
- A taxable event occurs at legal disposal or when position is closed or realised: for swaps this is the exchange moment; for perpetuals and futures it is the point of settlement or deemed closure.
- Accurate cost-basis tracking and records are essential: HMRC requires timelines, acquisition costs, fees, and evidence of matching rules for share‑like pooling where relevant.
- Report via Self Assessment (SA108) or as trading income where applicable: late or incorrect reporting risks penalties and enquiries.
How HMRC treats crypto swaps for Capital Gains Tax
HMRC treats most disposals of cryptoassets as chargeable events under Capital Gains Tax rules. A swap where one cryptoasset is exchanged directly for another is typically a disposal of the asset given up and an acquisition of the asset received. The disposal value is the market value of the asset received at the time of the swap.
What counts as a disposal for HMRC
- Exchange: giving up one cryptoasset in return for another counts as a disposal.
- Sale: converting crypto to sterling or another fiat currency is a disposal.
- Use to obtain goods or services: spending crypto is a disposal.
- Gifting (except to spouse in certain cases): gifting is a disposal for CGT purposes.
If a swap is part of a trading business that has the characteristics of a trade (frequency, organisation, motive), HMRC may reclassify gains as trading income subject to income tax and NICs. For the typical investor however, CGT applies.
Sources: HMRC guidance on cryptoassets and tax is available at HMRC: Tax on cryptoassets and the Cryptoassets Manual at HMRC Cryptoassets Manual.
Tax implications of crypto-to-crypto swaps and exchanges
A crypto-to-crypto swap typically creates two tax entries: a disposal of the asset given up and an acquisition of the asset received using the disposal proceeds as the acquisition cost. The disposal proceeds are the market value (in GBP) of the asset received at the time of the swap.
How to determine disposal value and base cost
- Disposal value: use a reliable market rate at the time of the swap. When multiple exchanges exist, use the best evidence of an arm's-length rate, documented in records.
- Acquisition cost of new asset: equal to the disposal value of the asset given up (market value in GBP).
- Include fees and commissions: transaction fees that are part of acquiring or disposing should be added to acquisition cost or deducted from disposal proceeds as allowable costs, where appropriate.
Example: simple crypto-to-crypto swap (worked example)
- Date: 5 April 2026
- Asset A acquired in 2024 for £2,500
- Swap Asset A for Asset B on 5 April 2026; market value of Asset B at swap = £4,200
- Disposal gain = £4,200 − £2,500 = £1,700 (less allowable costs and pensions reliefs if any)
- New base cost for Asset B = £4,200
This gain should be reported in the tax year in which the disposal occurred.
Derivatives, CFDs and margin trading: tax treatment
Derivatives come in many forms: futures, options, perpetual swaps, CFDs, and spread bets. Tax treatment depends on whether the contract is cash‑settled or results in delivery of a cryptoasset, and on the taxpayer's pattern of activity.
Cash-settled derivatives and CFDs
- CFDs and cash-settled derivatives normally produce income tax treatment for many traders, especially when held as part of a trading business or frequently used with leverage and margin. Profits are often taxed as trading income and losses can be allowable against income if trading criteria are met.
- Spread bets remain tax-free in the UK (subject to conditions) but are distinct from crypto markets because most crypto spread bets are offered by regulated firms and may not be widely available for direct crypto exposure.
Physically settled derivatives (delivery of crypto)
When a derivative results in the delivery of a cryptoasset, the point of delivery is likely a disposal of the position and CGT treatment may apply on the delivered asset. For example, exercising a crypto option that results in receiving bitcoin in exchange for sterling or another asset will normally create a disposal.
Margin trading and funding fees
- Margin positions where the trader does not take legal ownership of the underlying asset but benefits from price movements may be treated as taxable income or as capital, depending on facts. Funding charges, borrowing costs and finance fees require careful treatment: some are allowable against income, others adjust acquisition/disposal cost.
- Perpetual swaps that are cash‑settled and never result in delivery often create income-like profits and losses; taxable treatment should be reviewed with reference to HMRC guidance and case law.
Table: comparative tax treatment summary
| Instrument |
Typical tax treatment |
Key point |
| Crypto-to-crypto swap |
Capital Gains Tax (disposal) |
Use market value in GBP at swap time |
| Cash-settled perpetuals / futures |
Often income tax for frequent traders; consult facts |
Settlement method matters |
| CFDs |
Income tax for trading businesses; capital for investors |
Look at frequency, organisation and intention |
| Options (exercise results in delivery) |
CGT on disposal when delivery occurs; premium treatment varies |
Premium may be income or adjust base cost |
When a swap becomes a taxable event in UK
A swap becomes a taxable event when legal ownership of one asset is given up and another asset or value is received in exchange. For many crypto-to-crypto swaps this is instantaneous: the moment the exchange counterparties or smart contract effect settlement.
Key timings and triggers
- Execution and settlement time: where execution and settlement happen together (most on-chain swaps), the taxable event is the timestamp of settlement.
- Conditional or staged swaps: if settlement is conditional (e.g. options, escrow), the taxable event can occur when the condition is met or when the option is exercised.
- Synthetic positions: for perpetuals and margin positions that are never settled physically, the taxable moment may be when the position is closed or when profit is realised as cash.
Practical note on valuation moments
Valuation should use a market rate at the moment of disposal. Where markets thin or price feeds differ across exchanges, document the chosen source and why it represents a fair market value.
Calculating gains, losses and allowable deductions for swaps
Accurate gain calculation requires: acquisition cost, allowable costs, disposal proceeds (GBP value), and appropriate pooling rules where multiple acquisitions exist. For UK residents, the 'same-day' and '30-day' matching rules used for shares also apply to cryptoassets in certain circumstances.
Matching and pooling rules (brief)
- Same-day rule: disposals are matched to acquisitions made on the same day.
- 30-day rule: disposals are matched to acquisitions in the 30 days following the disposal (bed and breakfasting rule).
- Section 104 pooling: remaining acquisitions form a pooled base cost for CGT calculations.
These rules affect the calculation of base cost and therefore the gain. Detailed guidance is in HMRC manuals: HMRC Capital Gains Manual.
Allowable deductions and expenses
- Transaction fees directly attributable to acquisition or disposal are allowable (added to cost or deducted from proceeds).
- Funding fees, borrowing costs and platform charges require careful allocation: some adjust base cost, others are deductible from trading income depending on tax classification.
- Losses from disposals of cryptoassets can be offset against other capital gains in the same tax year, carried forward if unused, and must be claimed via Self Assessment.
Worked example: margin trade converted to spot and swapped
- Opened position via a CFD/perpetual — profit realised in GBP and then used to buy a new crypto asset. For tax: the profit from the derivative may be income (taxed under income tax) rather than CGT; the subsequent purchase of crypto uses the net cash proceeds as acquisition cost. Document both events separately.
How to report depends on tax classification of the gain.
Reporting for CGT (capital disposals)
- Use Self Assessment form SA108 (Capital gains summary) if the total gains exceed the annual exempt amount or if total proceeds exceed four times the annual exempt amount. Guidance: Self Assessment.
- Report in the tax year of disposal. Deadlines: 31 January following the tax year for online returns, 31 October for paper returns, and the same 31 January date for payment of tax owed (with potential earlier payment on account rules if applicable).
Reporting for income tax (trading profits)
- If activity qualifies as trading, report profits on Self Assessment under trading income. Pay Class 2/4 NICs where applicable.
Records HMRC expects
- Date and time of each disposal and acquisition
- Type and quantity of cryptoassets
- Value in GBP at disposal/acquisition
- Fees and commissions
- Exchange/wallet used and transaction IDs
- Reconciliations between exchange statements and tax computations
A downloadable record template aligned to HMRC expectations reduces risk in an enquiry. HMRC stresses that records must be kept for at least 5 years after the 31 January submission deadline of the relevant tax year.
Source pages: Report and pay Capital Gains Tax and HMRC guidance for individuals.
Flow: how swaps and derivatives become taxable
🔍 **Step 1** → determine nature: swap vs derivative
🔁 **Step 2** → identify settlement: physical delivery or cash
💷 **Step 3** → value in GBP at disposal moment
🧾 **Step 4** → apply matching/pooling rules for base cost
✅ **Outcome** → classify as CGT disposal or trading income and report
Advantages, risks and common errors
✅ Benefits / when to apply
- Clear rules reduce enquiry risk when swaps and derivatives are tracked and valued in GBP.
- Correct classification can deliver more favourable tax treatment (capital rates vs income tax).
- Good records allow efficient use of losses and reliefs.
⚠️ Errors to avoid / risks
- Failing to convert disposal values to GBP at the correct time and using inconsistent exchange rates.
- Treating derivative profits as capital in error when activity meets trading tests.
- Not accounting for funding charges, fees or adjustments that affect base cost.
- Poor record-keeping that triggers HMRC enquiries and penalties.
Questions frequently asked
What counts as a taxable swap under HMRC rules?
A swap where one cryptoasset is exchanged for another is typically a taxable disposal for CGT, valued at the market price in GBP at the time of the swap.
Are perpetual swaps taxed as capital gains or income?
Perpetuals that are cash‑settled and used in a trading manner are often treated as income; physically settled positions lean towards CGT. The taxpayer’s pattern of activity matters.
How should fees and funding rates be treated?
Fees directly attributable to acquisition or disposal adjust the base cost or proceeds. Funding charges and finance fees can be income or allowable expenses depending on whether the activity is trading.
When must crypto gains be reported to HMRC?
Report in the Self Assessment for the tax year when the disposal occurs. Online deadline: 31 January following the tax year; payment date also 31 January (exceptions apply).
Can losses from crypto swaps be carried forward?
Yes, capital losses can be offset against capital gains in the same year and carried forward if unused, subject to timely reporting.
Do DeFi AMM swaps create taxable events?
Yes. Swapping via AMMs (automated market makers) is typically a disposal at the point of swap; additional complexity arises for liquidity provision tokens and rewards, which may create separate income events.
Is proof from exchanges sufficient for HMRC?
Exchange reports help but should be supplemented with transaction IDs, timestamps, and reconciliations. HMRC expects clear evidence of value in GBP and the logic behind chosen rates.
Your next step:
- Gather transaction history from every exchange and wallet and convert all timestamps and GBP values into one workbook.
- Identify swaps, derivatives and their settlement method; mark events as CGT or income candidates.
- If complexity or large volumes exist, obtain formal tax advice or use specialist crypto tax software and prepare SA108 or trading summaries for Self Assessment.
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.