What Happens If I Was Scammed or Hacked: Can I Claim a Tax Loss

Falling victim to a scam or hack is devastating. Whether you lost crypto assets, investment funds or personal savings the emotional impact is often just as painful as the financial loss. One of the first questions people ask afterwards is whether they can claim a tax loss to reduce their tax bill. In my opinion this is an area where people receive the most misleading advice online because HMRC’s rules around scams, hacks and lost assets are detailed and in some cases very strict. It is possible to claim a tax loss in some situations although you must meet HMRC’s conditions and provide the correct evidence.

This guide explains exactly what happens if you were scammed or hacked and whether you can claim a tax loss. You will learn how HMRC treats lost assets, the conditions for claiming a capital loss, which scams qualify, which do not, how crypto hacks are assessed, what evidence you must keep and the common mistakes that lead HMRC to reject loss claims. I will also walk you through practical real world examples because these make the rules far easier to understand.

By the end you will know exactly when you can claim a tax loss and what steps you need to take if you have been the victim of fraud.

Understanding the HMRC Approach to Scams and Hacks

HMRC does not automatically allow tax relief just because you have lost money. The key question HMRC asks is:

Has a disposal taken place?

For a loss to be allowable for Capital Gains Tax purposes there must be:

• A disposal

• Of a chargeable asset

• With a demonstrable loss

• Supported by evidence

Scams and hacks are treated as disposals only in some circumstances. In my opinion this is where people become confused. Losing money does not automatically create a tax loss. HMRC looks at the nature of the scam, whether an asset ever existed, whether beneficial ownership changed and whether there is any chance of recovery.

When You Can Claim a Tax Loss After Being Scammed or Hacked

HMRC may allow you to claim a capital loss if:

• You owned a genuine asset

• You lost that asset permanently

• You have no realistic prospect of recovery

• The asset was disposed of due to fraud or theft

• You can clearly evidence the loss

This applies to assets such as:

• Shares

• Cryptocurrency

• Investment portfolios

• NFTs

• Land or property (rare but possible)

• Valuable possessions stored with third parties

If the scam or hack effectively removed the asset from your control you may be able to claim a negligible value claim or a capital loss on disposal.

You may be able to claim when:

• Crypto was stolen from your wallet

• An exchange was hacked and assets were permanently lost

• Shares or investments were transferred without your permission

• A scammer accessed your account and liquidated your holdings

• You sent crypto to the wrong address as part of a scam

• You invested in a legitimate asset that later became worthless

These scenarios can qualify as capital losses once you prove the asset’s value has become negligible or the loss is permanent.

When You Cannot Claim a Tax Loss After a Scam or Hack

HMRC will not allow a loss if:

• The asset never existed

• You invested in a fake platform with no underlying asset

• You voluntarily sent money to a scammer

• You believed you were buying crypto or shares although actually purchased nothing

• You lost cash rather than a capital asset

• You were misled into buying something that never belonged to you

HMRC’s position is simple:

If you were tricked into handing over money for something that never existed then no disposal of a real asset occurred, therefore no capital loss arises.

This is the rule that catches out most victims of investment scams. In my opinion it is deeply unfair on an emotional level although HMRC cannot allow tax relief on non existent assets even when the individual acted in good faith.

How HMRC Treats Crypto Hacks and Theft

Cryptocurrency creates special challenges because scams and hacks are common. HMRC’s position is clear:

Crypto theft can qualify as a disposal if:

• The tokens existed

• You owned them

• They were permanently removed through theft

• You can prove the hack occurred

• There is no realistic chance of recovery

You may be able to claim a negligible value claim or a capital loss on disposal.

Crypto scams may not qualify if:

• You thought you were buying tokens that never existed

• You sent money to a scam platform

• You transferred tokens in expectation of receiving more

• You voluntarily approved a scam contract or phishing transaction

• You participated in a fake investment scheme

In these cases HMRC does not accept a capital loss because there was no disposal of a real asset.

The Two Ways to Claim a Tax Loss

There are only two valid ways to claim a tax loss for scams or hacks:

1. Claim a capital loss on a disposal

You can claim a loss for:

• Stolen crypto

• Hacked shares

• Assets removed from your ownership

• Fraudulent transfers of investments

• Scams where you sent actual assets that became irrecoverable

This is reported through the Capital Gains section of your Self Assessment.

2. Negligible value claim

This applies if:

• You still own the asset

• The asset is effectively worthless

• A scam removed its value

• A cryptocurrency became valueless

• A shareholding is worth near zero

You make a negligible value claim which treats the asset as disposed of and reacquired at negligible value, creating a capital loss.

Negligible value claims are commonly used for failed crypto projects and collapsed exchanges.

Evidence HMRC Requires Before Allowing a Loss Claim

HMRC is strict about evidence because fraud and crypto scams are hard to verify. You should gather:

• Transaction history

• Wallet addresses

• Exchange statements

• Police reports

• Action Fraud reference numbers

• Screenshots of balances before and after

• Blockchain transaction IDs

• Emails showing the scam

• Documentation proving attempted recovery

• Evidence of exchange collapse or platform insolvency

In my opinion the stronger your evidence the higher the chance HMRC will accept the loss.

Real World Examples: When Losses Are Allowed

Example 1: Crypto stolen from a private wallet

• Your MetaMask wallet is hacked

• 3 BTC stolen

• You report the theft

• You provide blockchain evidence

HMRC allows a capital loss because the asset existed and was disposed of through theft.

Example 2: Exchange collapse

• You held crypto on an exchange

• The exchange becomes insolvent

• Your assets are locked permanently

• You have statements proving ownership

HMRC allows a negligible value claim.

Example 3: Shares stolen through identity theft

• Fraudster accesses your brokerage account

• Shares sold without permission

• Money withdrawn

HMRC allows a loss on disposal.

Real World Examples: When Losses Are Not Allowed

Example 1: Fake investment platform

• You send £10,000 to a crypto site

• No real tokens ever existed

• The platform disappears

HMRC will not allow a loss claim because no asset existed.

Example 2: Phishing scam

• You sign a fraudulent smart contract

• Tokens are transferred knowingly (even if tricked)

• The transaction was voluntary in technical terms

HMRC may consider this a non allowable loss because the transaction was a transfer rather than a theft.

Example 3: Sending crypto expecting high returns

• You send crypto to a scammer who promises 5 percent daily

• You willingly transferred the asset

• Even though the scheme was fraudulent

HMRC does not allow a loss.

In my opinion this is the harshest outcome because the victim acted honestly although HMRC focuses on the legal structure of the transaction.

How To Claim a Tax Loss on Your Self Assessment

If you have a valid capital loss you must:

• Report the disposal in your Self Assessment

• Use section: Capital Gains

• Enter disposal value (often zero)

• Enter cost basis (original purchase price)

• Select that the loss was due to theft or permanent loss

• Attach evidence if requested

Capital losses can be carried forward indefinitely.

Can You Offset Scam Losses Against Income Tax

No. HMRC does not allow capital losses to reduce:

• Salary

• Dividends

• Business income

• Rental income

• Pension income

Capital losses can only be used against capital gains.

What Happens If HMRC Rejects Your Loss Claim

HMRC may:

• Ask for more evidence

• Ask detailed questions

• Request transaction records

• Reject the claim outright

If rejected you can:

• Appeal the decision

• Provide further proof

• Request internal review

• Refer to the Tax Tribunal if necessary

In my opinion appeals are successful when the evidence is strong or where the taxpayer clearly held a genuine capital asset.

Protecting Yourself in the Future

Although this guide is about tax not security it is worth remembering:

• Use cold storage for long term crypto

• Enable multi factor authentication

• Avoid unsolicited investment offers

• Research platforms before investing

• Never share seed phrases

• Avoid “too good to be true” rewards

• Keep detailed transaction history

Your tax position becomes far easier to defend when your documentation is strong.

Conclusion

You can claim a tax loss after being scammed or hacked only in specific circumstances. HMRC will allow a capital loss if you lost a genuine asset that you owned and there is no realistic possibility of recovery. You cannot claim a loss if you invested in a fake platform, bought something that never existed or voluntarily transferred assets to scammers under false promises. Crypto hacks, exchange collapses and thefts can qualify for capital loss treatment or negligible value claims as long as you maintain accurate records.

In my opinion the key is to understand whether a real disposal took place. If it did, HMRC may allow the loss. If it did not, the tax system cannot give relief even if the financial harm was real. With strong evidence and correct reporting you can recover some value through tax relief when a genuine asset is lost.