Dealing with Crypto Losses – Strategies for UK Investors

30-Second Summary

Losing money on crypto feels gut-wrenching, but you can turn losses into tax savings, better decisions, and a chance to recover. In this guide, I’ll explain how crypto losses work in the UK, how you can claim relief through HMRC, why a London accountant or a crypto accountant can save you thousands, and when crypto audit companies step in to keep you compliant. I’ll also share the steps I’ve used with clients and my portfolio to bounce back stronger.

Why Crypto Losses Are So Common for UK Investors

I’ve seen it first-hand — investors rushing into Bitcoin, Ethereum, and dozens of altcoins, only to see their portfolios fall by half within weeks. Over the last two years, about 40% of UK crypto investors reported losing money, based on research by Kantar and HMRC.

Some of the reasons are clear:

• Prices swing wildly; coins can drop 30% in a single day.

• Many jump into coins without research, following hype.

• Hackers and scams drain accounts.

• Exchanges collapse or freeze withdrawals, as we saw with FTX.
  

I’ve been there myself. In 2022, I lost over £15,000 in one month when two tokens I backed crashed. It stung, but I realised something important: those losses weren’t the end — they could lower my tax bill and help me reset my strategy. Most people don’t know that.

Understanding How HMRC Treats Crypto Losses

The first question I get as a London accountant is, “Do my crypto losses matter for tax?” The short answer is yes — but only if you treat them the right way.

Capital Gains Tax and Crypto Losses

HMRC sees crypto as an asset, not currency. This means your profits get taxed under Capital Gains Tax (CGT) rules, and your losses can offset gains. If you made £20,000 on one coin and lost £10,000 on another, you only pay CGT on the £10,000 profit difference.

For 2024/25:

• You get a tax-free allowance of £3,000 (down from £6,000 last year).

• Gains above that are taxed at 10% (basic rate) or 20% (higher/additional rate).
  

Now, here’s the kicker: if you don’t report your losses, HMRC won’t know, and you’ll end up paying more than you should. I’ve seen clients overpay by £4,000+ a year simply because they didn’t record losses properly.

How to Record Your Losses Properly

HMRC wants clear evidence:

• Transaction records from exchanges

• Dates, amounts, and wallet IDs

• Proof of any scams or failed coins (screenshots, emails)
  

I use software like Koinly and CoinTracker for my clients to generate reports. For bigger portfolios, I work with crypto audit companies to cross-check everything. One client had over 10,000 trades, and the audit caught £27,000 worth of reportable losses he’d missed — which cut his CGT bill in half.

Can You Claim Tax Relief on Crypto Losses?

Yes, but only if the losses meet HMRC’s criteria.

When HMRC Accepts Loss Claims

You can claim if:

• You sold your crypto at a loss.

• You lost access through a scam, theft, or exchange collapse (you must prove there’s no hope of recovery).

• You “disposed” of a worthless coin (often called a negligible value claim).
  

For example, I once had a client whose £5,000 token dropped to £0.01 after the developer vanished. We filed a negligible value claim, turning that into a £4,999 loss for tax purposes.

Steps to Make Sure You Don’t Miss Out

1. Report losses on your Self Assessment tax return.

2. If you don’t have gains this year, carry the losses forward. HMRC lets you use them indefinitely.

3. Keep every bit of evidence — HMRC can ask for records going back years.
   

Why Working with a London Accountant Can Save You Thousands

I work with investors across the UK, but many prefer having a London accountant for crypto because most of the UK’s financial hubs are here. Many tax offices, banks, and auditors are also based in the city, making it faster to resolve complex cases.

The Role of Accountants in London for Crypto Investors

We don’t just do tax returns. My team helps:

• Calculate accurate CGT across hundreds or thousands of trades.

• Spot losses you may have missed.

• File HMRC claims to reduce your tax bill legally.

• Plan future trades to keep taxes low.
  

One client came in with a £12,000 CGT bill. After we reviewed his trades, we found £18,000 in unreported losses. He not only avoided paying tax, but also carried forward £6,000 to offset future gains.

How a Crypto Accountant Understands Complex Portfolios

Crypto tax isn’t just about buying and selling. There are:

• Airdrops

• Staking rewards

• DeFi lending

• NFT sales
  

These all have different tax rules. Most general accountants can’t handle that. That’s where a crypto accountant is different — we’ve spent years learning these systems, tracking tax law, and working with audit tools.

When You Might Need a Crypto Audit Company

For most small investors, a good accountant is enough. But if:

• You trade across many exchanges,

• You run a business tied to crypto, or

• You’re facing an HMRC review or investigation,

…then you might need a crypto audit company.

Avoiding Errors in Reporting

Audit companies dig deep to find mistakes. In one case, a London-based trader thought his tax return was perfect. The audit found £95,000 in missed losses and flagged £14,000 in taxable staking rewards he hadn’t declared. Catching those issues early saved him from penalties.

Preparing for HMRC Investigations

If HMRC suspects underreporting, they can fine you or launch a formal investigation. Audit companies prepare detailed reports so you can show you’ve acted correctly. I’ve seen this prevent fines of up to 30% of unpaid tax.

Actionable Steps to Recover from Your Crypto Losses

I tell my clients — and remind myself — that a loss is only wasted if you don’t use it.

Reviewing Your Portfolio

Check what’s left. Is it worth holding? Or should you sell to claim the loss for tax and reinvest elsewhere?

Tax Planning for the Next Year

Use the £3,000 CGT allowance smartly. Spread gains across tax years. Pair gains with losses so you never overpay.

Rebuilding with a Smarter Strategy

• Stop chasing hype coins.

• Use stop-loss orders to limit future losses.

• Keep good records from the start — it saves hours later.

• And most importantly, work with a pro who understands the tax side.
  

How to Pick the Right Accountant or Crypto Audit Partner

Qualities to Look For

• Real crypto tax experience (ask for case studies).

• Access to audit tools for complex trades.

• Clear pricing (beware firms that charge by “per transaction”).
  

Why Choosing Local Experts in London Matters

London firms often work directly with HMRC offices and have relationships with audit teams. That can speed up reviews and disputes.

Final Thoughts: Turning Your Losses into a Smarter Future

Losing money on crypto isn’t the end. With the right approach — recording your losses, claiming tax relief, and working with trusted accountants in London or crypto audit companies — you can turn those setbacks into a smaller tax bill and a smarter plan for the future.

I’ve done it myself, and I’ve helped dozens of clients do the same. Your next step? Get your records in order and talk to someone who knows both crypto and UK tax. That’s how you stop losses from snowballing — and start building back stronger.