The UK crypto loss framework
UK capital losses on crypto follow the same rules as losses on shares and other CGT assets:
- Losses are claimed against capital gains in the same tax year first
- Excess losses carry forward indefinitely against future capital gains
- Losses must be claimed within 4 years of the end of the tax year in which they arose, otherwise lost forever
- The claim is made on SA108 (or by amendment if the original return omitted it)
- Losses cannot generally be set against income (only against capital gains) — important asymmetry, especially for airdrops
To realise a loss, you need either:
- A disposal at proceeds less than acquisition cost (the standard case), OR
- A negligible value claim under TCGA 1992 s.24(2) — a deemed disposal at £nil for an asset that has effectively no value
Disposal losses — the standard case
The straightforward way to realise a loss: sell or otherwise dispose at less than acquisition cost.
| Method | Notes |
|---|---|
| Sell on a working exchange at market | Cleanest evidence; loss = proceeds − cost basis |
| Sell to a burn address (0x000...000) | Disposal at £nil proceeds; equivalent to permanent removal |
| Gift to a non-spouse | Disposal at FMV (not at consideration); loss only if FMV is below cost basis |
| Spousal transfer | No gain / no loss — does NOT realise a loss |
Negligible value claims under TCGA s.24(2)
For crypto that's become effectively worthless but isn't easily disposed of (no buyers, exchange delisted, project dead), the answer is a negligible value claim. Under TCGA 1992 s.24(2) as guided in CG13150-CG13160:
- The asset is deemed disposed at a chosen effective date for proceeds of £nil
- The full acquisition cost becomes a capital loss in the year of the claim
- The taxpayer still owns the asset (no actual transfer needed)
- If the asset later recovers value, any subsequent disposal proceeds are entirely chargeable gain (acquisition cost was reduced to £nil by the claim)
HMRC's tests for a successful negligible value claim:
- The asset must be of negligible value at the time of the claim. Floor price effectively £nil; no active market; no realistic prospect of disposal at non-trivial value.
- The asset must have had real value at acquisition. You can't claim negligible value on something that was always worthless.
- The loss in value must be permanent / structural, not just temporary market weakness.
For obviously dead tokens (project abandoned, contract paused, no liquidity anywhere), HMRC routinely accepts negligible value claims. For struggling-but-alive tokens, the claim is more likely to be challenged — you'll need to evidence that the value collapse is structural.
Lost wallets and forgotten keys
If you've irreversibly lost access to a wallet (lost seed phrase, dead hardware wallet with no backup, locked-out exchange account with no recovery), the technically correct UK position is mixed:
HMRC's stated position (CRYPTO22600) is that losing access to a private key does not, by itself, constitute a disposal. The taxpayer still owns the crypto; they just can't access it. No loss is realised automatically.
The route to claiming the loss:
- If you have evidence the wallet is permanently inaccessible (failed wallet recovery, exchange has wound up your account, hardware wallet physically destroyed with no backup) — you can make a negligible value claim on the basis that you can no longer realise any value from the asset
- HMRC will require evidence — proof of the wallet address, proof of attempted recovery, proof that recovery is structurally impossible
- For a hardware wallet failure where the seed phrase was the only backup and is lost, evidence might be: the hardware purchase receipt, the wallet's known transaction history confirming it was yours, and a written sworn statement that the seed is irretrievably lost
This is genuinely difficult to evidence well. The bar is "no reasonable prospect of recovery", which means HMRC will probe. Get advice if you're trying to claim a material loss on lost-key crypto — there are right and wrong ways to document it.
Stolen crypto — exchange hacks, rug pulls, phishing
For stolen crypto, HMRC's position is similar to lost-key:
- Theft is not itself a disposal. You still notionally own the asset; someone else has it without your consent.
- Practically, you can usually make a negligible value claim on the basis that the asset is irrecoverable from your hands
- Evidence required: police crime reference number, transaction records showing the theft, any communications with the exchange / wallet provider about the loss
The treatment differs by scenario:
| Scenario | Treatment |
|---|---|
| Exchange hack (FTX, Mt Gox, KuCoin) | Negligible value claim; or wait for the claim distribution and treat as part-recovery |
| Phishing / wallet drain | Negligible value claim with police report evidence |
| Rug pull (project insiders dumped, contract paused) | Negligible value claim once project is clearly dead |
| Scam ICO / pump-and-dump that died | Negligible value claim |
| Romance scam / phone scam (Bitcoin sent to scammer) | This is a disposal at £nil proceeds — full loss is realised at the date of transfer |
Important: insurance recoveries or partial bankruptcy distributions reduce the loss claimable. If you got £30,000 back from FTX on a £100,000 loss, the claimable loss is £70,000, not £100,000.
Collapsed exchanges — FTX, Celsius, Voyager, BlockFi
Many UK crypto holders are still working through losses from FTX (Nov 2022), Celsius (Jul 2022), Voyager (Jul 2022), BlockFi (Nov 2022) and others. The treatment is fiddly because there's been partial recovery in most cases.
The right approach:
- At the date the exchange was put into bankruptcy / froze withdrawals, make a negligible value claim on the affected balance (or wait, depending on tax-year planning)
- When you later receive a partial distribution, treat the distribution as proceeds against the originally-claimed loss — this generates either a gain (if distribution is bigger than what you'd previously claimed as residual basis) or further loss (if less)
- The administration / distribution may take 3-7 years in some cases — keep records and re-engage each year
An alternative approach: don't claim the loss until the final distribution is known. This is cleaner but means waiting years before getting any UK tax relief on what is genuinely a real loss. Most advisers recommend claiming the negligible value early to bring the loss into a useful tax year, then adjusting later.
For FTX specifically (which is paying out at a contested USD claim value rather than at original BTC/ETH terms), get specific advice — the treatment of the difference between original asset value and current USD distribution is unsettled.
How to claim — SA108 mechanics + the 4-year window
Practical mechanics for claiming a UK crypto capital loss:
- Calculate the loss = acquisition cost (from s.104 pool) − disposal proceeds (often £nil for negligible value)
- Report on SA108 in the year the disposal or negligible value claim is made
- For a negligible value claim, include a brief written explanation with the return (or via white-space disclosure on the return) — what asset, what date of claim, basis for the claim
- 4-year deadline: Losses must be claimed within 4 years of the end of the tax year of the loss. For a loss in 2025/26 (tax year ending 5 Apr 2026), the deadline is 5 Apr 2030.
- If you miss the deadline, the loss is gone — even if you couldn't have claimed it sooner. Get advice well before approaching the 4-year edge.
Once claimed:
- Losses set against capital gains in the same year first
- Excess carries forward indefinitely
- You don't have to use carried-forward losses fully against gains — you can use them just enough to bring the gain down to the AEA (£3,000), preserving the AEA