Save Them or Lose Them: The HMRC 4-Year Rule on Crypto Losses Most Investors Don’t Know About
There’s a common misconception in crypto investing:
If you make losses, HMRC will somehow already know about them.
They don’t.
And that misunderstanding could end up costing investors thousands in future tax relief.
Over the past few years, many UK crypto investors experienced brutal market downturns:
Tokens collapsing to near zero
Failed DeFi projects
NFT collections becoming worthless
Leveraged positions liquidated
Exchange failures wiping out balances
Significant realised trading losses during bear markets
At the time, most people thought:
“At least I can use the losses later.”
But here’s the problem:
In many cases, those losses were never actually reported to HMRC.
And under UK tax rules, that matters far more than most investors realise.
The hidden value of crypto losses
When people think about crypto tax, they usually focus on gains.
But experienced investors understand something important:
Properly recorded losses can become extremely valuable.
Allowable capital losses may potentially be used to offset future:
Crypto gains
Share disposals
Investment gains
Other chargeable asset disposals
In practical terms, this can significantly reduce future tax liabilities.
But only if those losses are preserved correctly.
And this is where many investors unknowingly make a costly mistake.
HMRC’s 4-year rule: use them or lose them
Under HMRC rules, capital losses generally need to be claimed within four years from the end of the tax year in which the loss arose.
This is one of the most overlooked deadlines in crypto tax.
For example:
If a crypto loss arose during the 2021/22 tax year
The deadline to notify HMRC is typically 5 April 2026
After that, the loss may no longer be claimable for future use.
That means many investors who experienced substantial losses during previous market crashes may now be approaching important deadlines without even realising it.
HMRC guidance confirms that capital losses must generally be claimed in order to be allowable for future offset purposes.
The mistake many investors make
Most people ignore losses during bear markets because the losses feel irrelevant at the time.
There are no gains.
No tax to pay.
No urgency.
So nothing gets submitted.
Then several years later:
Bitcoin recovers
Altcoins surge
Portfolios rebound
Investors cash out profitably
Only then comes the uncomfortable discovery:
“Those old losses were never reported.”
And suddenly, what could have reduced a future tax bill significantly is no longer available.
Not because the losses didn’t happen.
But because they were never formally lodged with HMRC.
“But I already used Koinly…”
This is something we hear regularly from clients.
“I’ve already got my crypto losses calculated in Koinly. Isn’t that enough?”
Not necessarily.
Platforms like Koinly can be extremely useful for calculating gains and losses across exchanges and wallets. In fact, many investors are already further ahead than they realise because the calculations themselves may already exist.
But calculating a loss and preserving a loss are two different things.
The important questions are:
Has the loss actually been reported to HMRC?
Was it submitted correctly?
Was it lodged within HMRC’s deadline?
Will HMRC recognise it for future offset purposes?
This is where many investors unknowingly stop halfway through the process.
The numbers may already exist.
But unless the loss is formally claimed correctly, future tax relief could still be at risk.
A situation we see regularly
An investor actively traded during the previous bull market and later suffered substantial losses during the downturn.
Like many people, they used crypto tax software to reconcile their transactions and generate reports.
Everything was calculated.
But nothing was submitted.
Years later, the market recovered and significant gains were realised again.
Only then did they realise:
The historic losses had never been formally reported
HMRC deadlines were approaching
Valuable future tax relief could potentially be lost
This situation is becoming increasingly common as markets recover and investors revisit old trading activity.
What actually counts as a crypto loss?
Not every drop in value creates an allowable tax loss.
Potentially allowable losses may arise from:
Selling crypto below acquisition cost
Token-to-token swaps at a loss
Certain NFT disposals
Failed tokens becoming negligible in value
Certain DeFi disposals
Liquidation events
Exchange collapses in some circumstances
However, the tax treatment depends heavily on the facts.
This is why proper review matters before making submissions to HMRC.
Because incorrectly categorised losses can create further complications later.
The process of preserving crypto losses properly
In many cases, the process is more manageable than investors expect.
It generally involves:
Reviewing historic crypto activity
Identifying allowable disposals and losses
Calculating losses accurately
Reviewing exchange and wallet records
Preparing supporting calculations
Submitting the claim correctly to HMRC
Ensuring the losses are formally recorded for future use
For investors who already have reports prepared using tools like Koinly, the process can often move much faster because much of the transaction reconciliation work has already been completed.
Why investors are taking action now
The crypto compliance environment is changing rapidly.
HMRC is increasing:
Exchange data collection
International information sharing
Blockchain analysis capabilities
Crypto-focused compliance activity
Many investors are now realising they need to organise historic crypto positions properly before future enforcement becomes more aggressive.
And importantly, this includes losses—not just gains.
Because a well-preserved capital loss today could become extremely valuable tomorrow.
How Crypto Tax Accountants helps clients
At Crypto Tax Accountants, we help investors:
Review historic crypto transactions
Assess whether losses may still be claimable
Identify approaching HMRC deadlines
Review Koinly and other crypto tax reports
Prepare compliant HMRC submissions
Preserve allowable losses for future offset purposes
In many situations, clients are surprised by how much potential future tax relief may still be recoverable.
But timing matters.
Once HMRC deadlines pass, options can narrow significantly.
Don’t let valuable losses disappear quietly
One of the biggest mistakes in crypto tax is assuming losses are automatically preserved forever.
They are not.
The market may forget previous crashes.
HMRC deadlines do not.
If you experienced crypto losses in previous tax years and never formally recorded them, now is the time to review your position properly.
Because preserving those losses today could potentially save substantial tax in the future.
Book a free review call
If you want clarity on:
Whether your crypto losses are still claimable
Whether your Koinly reports are sufficient
How much future tax relief may potentially be preserved
Whether you are approaching HMRC deadlines
Or how to properly lodge crypto losses going forward
We can help you review your position before valuable relief is lost unnecessarily.
A short conversation today could preserve significant future tax savings for years to come.
Disclaimer: This blog provides general information only and does not constitute legal, tax, or financial advice. Professional advice should be obtained based on your specific circumstances. No reliance should be placed on this content, and protection applies only to clients who formally engage our services.
