Do I Pay Tax When I Swap One Cryptocurrency for Another

Many crypto investors believe that tax only applies when converting their coins back into pounds or dollars. However, in the UK, HMRC treats swapping one cryptocurrency for another as a taxable event. Whether you exchange Bitcoin for Ethereum, or stablecoins for altcoins, the transaction can create a gain or loss that must be reported. This article explains when and how tax applies to crypto-to-crypto swaps, how to calculate your gain, and how to stay compliant with HMRC rules.

HMRC’s view on crypto swaps

HMRC does not consider cryptocurrency to be money. It treats crypto assets as property for tax purposes, meaning Capital Gains Tax (CGT) applies whenever you dispose of one crypto asset even if you do not receive cash.

According to HMRC, a disposal includes:

  • Selling crypto for fiat currency

  • Swapping one cryptocurrency for another

  • Using crypto to buy goods or services

  • Gifting crypto to someone other than your spouse or civil partner

So, when you trade Bitcoin for Ethereum, you are disposing of Bitcoin and acquiring a new asset (Ethereum). This disposal may create a capital gain or loss based on how much the Bitcoin was worth when you sold it versus how much you originally paid for it.

Why swapping crypto is taxable

Although no money changes hands, the swap is considered a sale because you have given up ownership of one asset in exchange for another. HMRC taxes the gain based on the market value of the crypto you received at the time of the swap.

Example

You bought 1 Bitcoin for £20,000 in 2023. In 2025, you exchange it for Ethereum when Bitcoin’s market value is £30,000.

  • Disposal value (Bitcoin): £30,000

  • Cost basis (what you paid): £20,000

  • Gain: £10,000

That £10,000 is subject to Capital Gains Tax, even though you did not convert it into pounds.

If instead the Bitcoin had fallen in value to £15,000, you would record a £5,000 capital loss, which can be used to offset other crypto or investment gains.

How to calculate gains when swapping crypto

To work out your gain or loss on a crypto swap, follow these steps:

  1. Determine how much the disposed crypto was worth in pounds at the time of the swap.

  2. Subtract the original purchase cost (including transaction fees) from that value.

  3. The result is your gain or loss for Capital Gains Tax purposes.

You can use the market rate from a reputable exchange or crypto price index at the time of the transaction.

Example

  • You bought Litecoin for £1,000.

  • Later, you exchanged it for Cardano when the Litecoin was worth £1,600.

  • You have a £600 gain.

That £600 must be added to your other crypto and investment gains for the year and reported if your total gains exceed the annual allowance.

The Capital Gains Tax allowance

Every UK taxpayer receives a Capital Gains Tax allowance, known as the Annual Exempt Amount. For the 2025–26 tax year, it is £3,000.

You only pay tax if your total net gains from all chargeable assets, including crypto, exceed £3,000 in a tax year.

If your total disposals (the value of all assets sold, swapped, or gifted) exceed £50,000, you must report them to HMRC even if your gains are below the allowance.

Reporting crypto swaps to HMRC

Crypto swaps are reported in the same way as other capital gains. You must include them in your Self Assessment tax return or use HMRC’s real-time Capital Gains Tax reporting service.

When reporting, you should include:

  • The date of the swap

  • The type and quantity of crypto disposed of

  • The pound value at the time of disposal

  • The cost of acquiring the disposed crypto

  • Any allowable costs such as transaction or exchange fees

If you made multiple trades, you can pool similar assets using HMRC’s share matching rules. These rules average the cost of your crypto holdings to simplify calculations.

Offsetting losses from crypto swaps

If you make a loss when swapping one cryptocurrency for another, you can record it and use it to reduce your future Capital Gains Tax bill.

Losses can be offset against other gains in the same year, or carried forward indefinitely to use in future tax years.

To preserve this relief, you must report your losses to HMRC within four years of the end of the tax year in which they occurred.

Example:
If you lost £2,000 on a swap this year and made a £5,000 gain next year, you could offset the loss and only pay CGT on £3,000.

What if I use crypto trading platforms frequently

If you trade crypto regularly or use automated bots, you might think of it as “trading” activity. However, HMRC still applies Capital Gains Tax for most individuals, not Income Tax.

Only in rare cases where crypto activity resembles a full commercial business would HMRC classify it as trading. In that situation, profits would be taxed as trading income instead of capital gains, and different expense rules would apply.

For the vast majority of investors, each crypto-to-crypto swap remains a CGT event.

How to keep accurate records

Because crypto transactions can occur frequently, record keeping is essential. HMRC expects you to maintain detailed records showing:

  • Dates of each transaction

  • Amount and type of crypto disposed of

  • Market value in pounds at the time

  • Transaction and network fees

  • Wallet and exchange details

Many investors use crypto tax software to automate this process and generate CGT reports.

Paying tax on stablecoin swaps

Swapping into or out of stablecoins such as USDT or USDC is also a taxable event. Although stablecoins are designed to maintain a steady value, the transaction still counts as a disposal for tax purposes.

Example:
If you swap Bitcoin for USDT worth £25,000 and the Bitcoin originally cost you £15,000, you will have a £10,000 gain, even though you did not cash out into pounds.

What if I do not declare crypto swaps

Failing to report taxable crypto gains can lead to penalties and interest charges. HMRC receives data from UK and international crypto exchanges, so undeclared activity can easily be identified.

If HMRC finds you have failed to declare gains, penalties depend on the reason for the omission:

  • Careless errors may result in a fine of up to 30% of the unpaid tax.

  • Deliberate non-disclosure can result in penalties of up to 100% of the tax owed.

Declaring your gains voluntarily, even if small, helps you avoid penalties and ensures compliance.

Final thoughts

Swapping one cryptocurrency for another is not a tax-free event in the UK. HMRC views each exchange as a disposal, meaning you could owe Capital Gains Tax on any profit, even if no fiat money changes hands.

To stay compliant, record the pound value of every swap, report all gains or losses, and keep thorough records of your transactions. If your total gains are small and below the annual allowance, no tax will be due, but reporting them demonstrates transparency and protects you in future tax years.

For regular traders or investors with complex portfolios, seeking professional crypto tax advice can help ensure your calculations are accurate and your reporting meets HMRC requirements.