Cost-basis methods

UK §104 pool explained

How HMRC pools crypto cost basis: the Section 104 pool, the same-day and 30-day matching rules, a worked example, and how it differs from South African FIFO.

Last reviewed: · Reviewed by Johan Pretorius, Registered Tax Practitioner

What the §104 pool is

The UK takes a different path from South Africa. For Capital Gains Tax, HMRC requires individuals to maintain a Section 104 pool for each token: a running total of the quantity held and the pooled allowable cost. Disposals deduct an average cost from the pool, not a first-in or specific cost.

How the pool grows and shrinks

  • Acquire more of the same token: add the quantity and the cost to the pool. The pool's average cost per unit updates.
  • Dispose of some: remove a proportionate share of the pooled cost (units sold ÷ units held × pooled cost) as the allowable cost of that disposal.

Worked example

You buy 2 ETH for £4,000 (pool: 2 ETH, £4,000). You sell 1 ETH for £3,000. The allowable cost is half the pool = £2,000, so the gain is £1,000. The pool becomes 1 ETH, £2,000.

The matching rules come first

Before the pool applies, two rules override it, in order:

  • Same-day rule: match the disposal with same-day acquisitions of the same token.
  • 30-day (bed-and-breakfasting) rule: then match with acquisitions in the next 30 days.

Only the remaining units are drawn from the §104 pool.

How this differs from South Africa

South Africa uses FIFO or specific identification and does not permit pooling/averaging for individuals. So a UK pooled cost and a South African FIFO cost for the same trades can differ materially. Apply the rules of the jurisdiction you are taxed in.

Not tax advice

UK allowances and rates change each tax year — confirm with HMRC.

Frequently asked questions

What is the Section 104 pool?
A per-token running total of quantity held and pooled allowable cost. Disposals deduct an average cost proportionate to the units sold, unless overridden by the same-day or 30-day rules.
What are the same-day and 30-day rules?
Disposals are matched first with same-day acquisitions, then with acquisitions in the following 30 days (bed-and-breakfasting), before drawing from the Section 104 pool.
Does South Africa use pooling like the UK?
No. South Africa uses FIFO or specific identification and does not permit averaging/pooling for individuals, so results can differ materially from the UK §104 pool.

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