Disclaimer: This article is intended as an informative piece. This is not accounting or tax advice. Please speak to a qualified tax professional about your specific circumstances before acting upon any of the information in this article.

When calculating the cost of acquisition for Capital Gains Tax (CGT) on cryptoassets such as bitcoin and ethereum, individuals must follow HMRC’s guidance regarding “Pooling”. HMRC describes the concept of pooling as “Instead of tracking the gain or loss for each transaction individually, each type of cryptoasset is kept in a ‘pool’. The consideration (in pounds sterling) originally paid for the tokens goes into the pool to create the ‘pooled allowable cost’”.

To find the allowable cost (also known as the base cost) for the CGT computation, the first step is to identify which cryptoassets which have been sold. The ‘matching rules’ as set out below determine the order in which cryptoassets are deemed to have been sold. On the disposal of cryptoassets, they are first matched with acquisitions:

  • 1. made on the same day (same day rule), then
  • 2. made in the next 30 days on a first-in first-out basis (bed and breakfasting rule), then
  • 3. the rest of the acquisitions are aggregated in the S104 pool (pooling rule)

The bed and breakfasting rule is the rule dictating how asset acquisitions between 2 – 30 days after a disposal are matched. This rule makes tax loss harvesting slightly more difficult, but still possible.


Need to sort out your crypto taxes? Use
Recap, the privacy focused cryptocurrency accounting software to calculate the taxable gain or loss on your cryptocurrency investments!

Did this answer your question?