Case Study: How To Calculate UK Crypto Trading Gains In 2025

This case study examines Alice’s cryptocurrency transactions, focusing on the tax implications arising from her Bitcoin (BTC) and Ethereum (ETH) trades.

Jurisdiction: United Kingdom (HMRC Rules)
Key Concepts: Pooled Cost Basis (Section 104), Allowable Costs, Fee Apportionment

Alice’s transactions list:

1. January 10, transferred 1 BTC into her wallet. No purchase costs information available.
2. January 12, bough 2 BTC, market price USD 55,000.
3. March 1, sold 0.5 BTC, market price USD 60,000, paid blockchain fee 0.01 BTC
4. March 5, swapped 1 BTC to 20 ETH, BTC market price USD 45,000, paid blockchain fee 0.05 BTC

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Transaction Summary And Key Calculations

1. Initial Transfer (Jan 10, 2025)

• Action: Transfer 1 BTC into wallet (no cost basis documentation).
• HMRC Treatment: Default cost basis = £0 (CRYPTO13100).

2. BTC Purchase (Jan 12, 2025)

• Action: Buy 2 BTC at $55,000 each.
• Cost Basis: $110,000.

3. BTC Sale (Mar 1, 2025)

• Action: Sell 0.5 BTC at $60,000.
• Fee: 0.01 BTC ($600 at $60,000/BTC).

4. BTC→ETH Swap (Mar 5, 2025)

• Action: Swap 1 BTC for 20 ETH (BTC price: $45,000).
• Fee: 0.05 BTC ($2,250 at $45,000/BTC).

1. BTC Pooled Cost Basis

Formula:
Average Cost Basis = (Total Pool Costs) / (Total Quantity)

Transactions:

Date	Action	Quantity	Cost Basis (USD)	Total Pool Cost	Remaining BTC
10/01/2025	Transfer	1 BTC	$0	$0	1 BTC
12/01/2025	Buy	2 BTC	$110,000	$110,000	3 BTC
01/03/2025	Sell	-0.5 BTC	$18,333.33*	$91,666.67	2.5 BTC
01/03/2025	Fee	-0.01 BTC	$366.67*	$91,300	2.49 BTC
05/03/2025	Swap	-1 BTC	$36,666.67*	$54,633.33	1.49 BTC
05/03/2025	Fee	-0.05 BTC	$1,833.33*	$52,800	1.44 BTC

*Calculated using average cost basis:

• Post-Jan 12: $110,000 ÷ 3 BTC = $36,666.67/BTC.

2. Fee Apportionment in Swaps

HMRC Rule (CRYPTO41300):
Fees paid in crypto must be split 50/50 between:

1. Allowable cost for the disposed asset (BTC).
2. Acquisition cost for the received asset (ETH).

Formula:

Fee Allowable Cost = (Fee Market Value) x 50%

Example (Mar 5 Swap):

• Fee MV: 0.05 BTC × $45,000 = $2,250.
• BTC Allowable Cost: $1,125 (reduces gain).
• ETH Acquisition Cost: $1,125 (increases ETH cost basis).

3. Gain/Loss Calculations

Mar 1 Sale

1. Main Disposal (0.5 BTC):

   • Proceeds: 0.5 × $60,000 = $30,000.
   • Cost Basis: 0.5 × $36,666.67 = $18,333.33.
   • Allowable Fee: $600.
   • Gain: $30,000 – $18,333.33 – $600 = $11,066.67.

2. Fee Disposal (0.01 BTC):

   • Proceeds: $600.
   • Cost Basis: 0.01 × $36,666.67 = $366.67.
   • Gain: $600 – $366.67 = $233.33.

Mar 5 Swap

1. BTC Disposal (1 BTC):

   • Proceeds: 1 × $45,000 = $45,000.
   • Cost Basis: 1 × $36,666.67 = $36,666.67.
   • Allowable Fee: $2,250 × 50% = $1,125.
   • Gain: $45,000 – $36,666.67 – $1,125 = $7,208.33.

2. Fee Disposal (0.05 BTC):

   • Proceeds: $2,250.
   • Cost Basis: 0.05 × $36,666.67 = $1,833.33.
   • Gain: $2,250 – $1,833.33 = $416.67.

ETH Acquisition:

• Total Cost Basis: $45,000 (BTC MV) + $1,125 (apportioned fee) = $46,125.
• Per ETH Basis: $46,125 ÷ 20 ETH = $2,306.25.

Final Transaction Entries

Date	Label	Amount	Asset	Price (USD)	Value (USD)	Fee (USD)	Cost Basis (USD)	Proceeds (USD)	Gain (USD)
10/01/2025	Transfer	1 BTC	BTC	N/A	N/A	$0	$0	N/A	N/A
12/01/2025	Buy	2 BTC	BTC	$55,000	$110,000	$0	$110,000	N/A	N/A
01/03/2025	Sell	0.5 BTC	BTC	$60,000	$30,000	$300	$18,333.33	$30,000	+$11,066.67
01/03/2025	Fee	0.01 BTC	BTC	$60,000	$600	$0	$366.67	$600	+$233.33
05/03/2025	Swap	1 BTC	BTC	$45,000	$45,000	$1,125	$36,666.67	$45,000	+$7,208.33
05/03/2025	Fee	0.05 BTC	BTC	$45,000	$2,250	$0	$1,833.33	$2,250	+$416.67

Remaining Assets

Asset	Quantity	Total Cost Basis (USD)	Average Cost Basis (USD)
BTC	1.44 BTC	$52,800	$36,666.67/BTC
ETH	20 ETH	$46,125	$2,306.25/ETH

Compliance Checklist

1. Documentation: Retain blockchain records for all transactions, including wallet addresses. Crypto tax services like DeCrypto.tax take care of this hassle free.
2. GBP Conversion: USD values must be converted to GBP using HMRC’s exchange rates for tax filing.
3. Gains Reporting: Alice should declare net gains of $18,925 ($11,066.67 + $233.33 + $7,208.33 + $416.67) in her 2025 tax return.