How does Section 104 pooling work for Ethereum and ERC-20 tokens?

Section 104 pooling applies separately to each fungible token type. ETH has its own pool, USDC has its own pool, LINK has its own pool, and so on. All acquisitions of a given token - from any source, including DEX swaps, Coinbase CSV, Aave rewards, or airdrops - go into that token's Section 104 pool at a weighted average allowable cost. When you dispose, the allowable cost comes from the pool average. NFTs are not pooled and are tracked individually with their own allowable cost. The same-day rule and 30-day bed and breakfast rule override the pool when triggered.

Are DeFi deposits and withdrawals chargeable disposals under HMRC rules?

HMRC's Cryptoassets Manual addresses DeFi under a beneficial ownership analysis. Where you deposit ETH and retain beneficial ownership of the underlying asset - for example through a receipt token that entitles you to redeem the same asset - HMRC may not treat the deposit as a disposal. Where you exchange one token for a different token (such as ETH for a protocol token), HMRC is more likely to treat this as a disposal and reacquisition. The facts of each protocol matter, and DYOR.tax records all DeFi interactions so you can review them with a UK tax adviser.

Is wrapping ETH to WETH, or stETH to wstETH, a taxable disposal?

HMRC's position on token wrapping is governed by the same beneficial ownership analysis as other DeFi interactions. Wrapping ETH to WETH, or stETH to wstETH, results in you holding a different token. In most circumstances this is treated as a disposal of the input token and an acquisition of the output token. The allowable cost for Capital Gains Tax on any future disposal of the wrapped token is its sterling value at the time of wrapping. DYOR.tax flags wrapping transactions for review.

How are Ethereum gas fees treated for UK tax purposes?

ETH spent on gas is a disposal of ETH at its sterling market value at the time of the transaction, which may generate a chargeable gain or loss. Gas fees paid to acquire a token can generally be added to the allowable cost of the asset acquired. Gas fees paid on a disposal can generally be deducted from the disposal proceeds. DYOR.tax accounts for gas fees in both the acquisition allowable cost and the disposal proceeds calculations.

When do I need to report Ethereum activity on Self Assessment?

You must report cryptoasset gains and income via Self Assessment. For the 2025-26 tax year (6 April 2025 to 5 April 2026): notify HMRC of any unreported gains or income by 5 October 2026. File your online Self Assessment return and pay any tax due by 31 January 2027. If you are already registered for Self Assessment, you will generally need to report disposals where total proceeds in a tax year exceed £50,000, even if the net gain falls below the Annual Exempt Amount of £3,000.

Ethereum Tax Calculator UK - Section 104 & HMRC

How HMRC treats Ethereum

HMRC does not treat Ethereum or any cryptoasset as money or currency. ETH is a chargeable asset for UK Capital Gains Tax purposes. Every disposal - selling ETH for sterling, swapping ETH for another token, or spending ETH on goods and services - triggers a capital gain or loss. Receiving ETH as staking rewards, income, or payment is generally taxable income at its sterling value on the date of receipt.

Chargeable disposals: selling ETH for sterling, swapping ETH for any token, spending ETH on purchases or services, gifting ETH to a person who is not your spouse or civil partner, ETH spent on gas fees (a disposal at the sterling market value at the time of the transaction).

Generally not a disposal: transferring ETH between wallets you own and control (no change of beneficial ownership), buying ETH with sterling, holding.

Section 104 pooling for ETH and ERC-20 tokens

Section 104 pooling applies separately to each fungible token type in your Ethereum wallets. ETH has its own Section 104 pool. USDC has its own. LINK, SHIB, and every other ERC-20 token type you hold each has its own pool. The pool maintains a running total of the quantity held and the total pooled allowable cost for that token type.

When you acquire ETH from any source - Coinbase, Uniswap, staking rewards, or an airdrop - all acquisitions go into the ETH pool. When you dispose of ETH, the allowable cost is drawn from the pool at the weighted average rate: (coins disposed of / total coins in pool) × total pooled allowable cost.

Two rules override the pool and must be checked first:

Same-day rule: ETH acquired on the same day as a disposal is matched against that disposal first, at its own acquisition cost.
30-day bed and breakfast rule: ETH reacquired within 30 days after a disposal is matched against that disposal (in chronological order), at the actual acquisition cost. This prevents artificial loss harvesting.

Only after both matching rules are exhausted does the disposal draw from the Section 104 pool.

Ethereum staking income under HMRC rules

HMRC generally treats staking rewards as miscellaneous income, if the activity does not amount to a trade. The income is the sterling value of the ETH received on the date it was credited. That sterling value then becomes the allowable cost for Capital Gains Tax when you later dispose of the staked ETH.

Where your staking activity amounts to a trade or business, Income Tax and National Insurance apply instead. The Merge (September 2022) was not a taxable event - ETH held before and after carries the same allowable cost. What changed is that staking rewards are now distributed directly to validators and delegators rather than through mining.

DeFi and HMRC's beneficial ownership analysis

HMRC's Cryptoassets Manual treats DeFi under a beneficial ownership framework. The key question for each protocol interaction is whether you retain beneficial ownership of the underlying asset:

Lending (Aave, Compound): if you receive aTokens or cTokens in exchange for ETH, HMRC may treat this as a disposal and reacquisition because you hold a different token. Interest received is generally taxable income.
Liquidity pools: depositing into a pool and receiving LP tokens may be a disposal and reacquisition in each direction. Withdrawal is treated similarly. This is fact-sensitive and protocol-specific.
DEX swaps (Uniswap, Curve, 1inch): swapping ETH or any ERC-20 for another token is a disposal of the input token and an acquisition of the output token.
Gas fees: ETH spent on gas is a disposal of ETH at the sterling market value at the time of the transaction. Fees on acquisitions can increase the allowable cost; fees on disposals can reduce the proceeds.

DYOR.tax records all DeFi interactions across 8,000+ protocols. All transactions are flagged so you can review complex cases with a UK tax adviser.

Liquid staking - stETH, wstETH, cbETH, rETH

Liquid staking introduces additional complexity under HMRC's analysis. Staking ETH via Lido and receiving stETH may be treated as a disposal of ETH and acquisition of stETH, because you hold a different token. Each daily stETH rebase is generally a miscellaneous income event at its sterling value on receipt, if the activity does not amount to a trade. The allowable cost of stETH at disposal is the sterling value at acquisition plus all rebases already recognised as income.

Wrapping stETH to wstETH is a further disposal. cbETH (Coinbase) and rETH (Rocket Pool) may be treated similarly, but the analysis depends on each token's mechanics and the beneficial ownership position - these should be reviewed with a tax adviser. DYOR.tax tracks liquid staking positions and flags each wrapping event for review.

NFTs - individually identified, not pooled

NFTs are non-fungible assets and are not pooled. Each NFT is a distinct chargeable asset with its own allowable cost - the sterling value at the time you acquired it. When you dispose of an NFT, the gain or loss is the disposal proceeds minus that individual allowable cost. NFTs cannot be pooled with other NFTs or with fungible tokens such as ETH or ERC-20s.

CGT rates and the Annual Exempt Amount

The CGT Annual Exempt Amount is £3,000 for both 2025-26 and 2026-27. Net capital gains from all cryptoasset disposals - including ETH and ERC-20 tokens - below this threshold owe no Capital Gains Tax. Gains above it are taxed at 18% for basic-rate taxpayers and 24% for higher and additional-rate taxpayers, following the October 2024 change.

Capital losses from Ethereum disposals can be offset against gains from other assets in the same tax year, with unused losses carried forward once claimed with HMRC.

For the 2025-26 tax year (6 April 2025 to 5 April 2026): notify HMRC of any unreported gains or income by 5 October 2026, and file your online Self Assessment return with payment by 31 January 2027.

Related calculators and guides

All countries: Ethereum Tax Calculator
UK country page: UK Crypto Tax Calculator
UK wallet calculators: MetaMask UK · Phantom UK

UK token calculators: Bitcoin UK · Solana UK

Guides: Crypto Staking Taxes · Airdrop Taxes · DeFi Lending Taxes

Last reviewed: April 2026 · Sources: HMRC Cryptoassets Manual (CRYPTO22000 onwards), TCGA 1992 s.104 · For UK resident individual taxpayers. Not tax advice.

Frequently Asked Questions

Section 104 pooling applies separately to each fungible token type. ETH has its own pool, USDC has its own, LINK has its own, and so on. All acquisitions of a given token - from any source including Coinbase, Uniswap swaps, staking rewards, or airdrops - go into that token's pool at a weighted average allowable cost. When you dispose, the allowable cost comes from the pool average. The same-day rule and 30-day bed and breakfast rule take priority over the pool when triggered. NFTs are not pooled and are tracked individually.

HMRC generally treats staking rewards as miscellaneous income, if the activity does not amount to a trade. The income is the sterling value of the ETH on the date it was credited to you. That sterling value then becomes the allowable cost for Capital Gains Tax when you later dispose of the staked ETH. If your staking amounts to a trade, Income Tax rules apply instead. Speak with a UK tax adviser if you are uncertain which treatment applies to your circumstances.

HMRC applies a beneficial ownership analysis. Where you deposit ETH and receive a different protocol token (such as an aToken or LP token), HMRC may treat this as a disposal and reacquisition. Where you retain beneficial ownership of the underlying asset throughout - for example through a token entitling you to redeem the same asset - HMRC may not treat the deposit as a disposal. The facts of each protocol matter. DYOR.tax records all DeFi interactions so you can review complex cases with a UK tax adviser.

Wrapping results in you holding a different token, and each wrapping step - ETH to stETH, stETH to wstETH - may be treated as a disposal of the input token and an acquisition of the output token, depending on the token mechanics and beneficial ownership analysis. The allowable cost for any future disposal of the wrapped token is its sterling value at the time of wrapping. DYOR.tax flags wrapping transactions for review with a UK tax adviser.

ETH spent on gas is a disposal of ETH at its sterling market value at the time of the transaction, which may generate a chargeable gain or loss. Gas fees on acquiring an asset can generally be added to the allowable cost of that asset. Gas fees on a disposal can generally be deducted from the disposal proceeds. DYOR.tax accounts for gas fees in both allowable cost and proceeds calculations across all EVM chains.

Staking ETH via Lido and receiving stETH may be treated as a disposal of ETH and acquisition of stETH, because you hold a different token. Each daily stETH rebase is generally a miscellaneous income event at its sterling value on receipt, if the activity does not amount to a trade. When you sell stETH, the allowable cost is the sterling value at acquisition plus all rebases already recognised as income. Wrapping stETH to wstETH is a further disposal.

You must report cryptoasset gains and income via Self Assessment. For the 2025-26 tax year (6 April 2025 to 5 April 2026): notify HMRC of any unreported gains or income by 5 October 2026. File your online return and pay any tax due by 31 January 2027. If you are already registered for Self Assessment, you will generally need to report disposals where total proceeds in a tax year exceed £50,000, even if the net gain falls below the Annual Exempt Amount of £3,000.

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