Section 104 Share Pooling for Crypto: How HMRC Calculates Cost Basis

If you have bought the same cryptocurrency at different prices over time, you cannot simply choose which purchase to match against a sale. HMRC requires you to use the Section 104 share-pooling method — the same method used for shares and securities.

What is Section 104 pooling?

Section 104 pooling creates a single "pool" for each token you own. Every time you buy a token, the cost is added to the pool and the quantity increases. The pool maintains a running average cost per token. When you sell, the cost basis is calculated using this average cost, not the actual price you paid for specific coins.

Worked example

January: you buy 2 ETH at £1,000 each. Pool: 2 ETH, total cost £2,000, average cost £1,000/ETH.

March: you buy 3 ETH at £1,500 each. Pool: 5 ETH, total cost £6,500, average cost £1,300/ETH.

June: you sell 1 ETH for £2,000. Cost basis from pool: £1,300. Capital gain: £700. Pool after sale: 4 ETH, total cost £5,200, average cost £1,300/ETH.

Same-day and 30-day rules override pooling

Before using the Section 104 pool, HMRC requires you to check two priority matching rules. First, the same-day rule: if you buy and sell the same token on the same day, those are matched directly. Second, the 30-day rule: if you sell a token and rebuy within 30 days, the sale is matched against the rebuy. Only after these rules are exhausted do you fall back to the Section 104 pool.

Why this matters

Without proper pooling, you might accidentally use FIFO (first-in-first-out) or specific identification methods, which are not HMRC-compliant. Using the wrong method could result in incorrect tax calculations and potential penalties. Many crypto tax tools default to FIFO because it is simpler — make sure yours supports Section 104.

Multiple tokens, multiple pools

Each cryptocurrency has its own separate Section 104 pool. Your Bitcoin pool is completely independent from your Ethereum pool. Wrapped versions (like WETH) and the underlying token (ETH) are generally treated as separate pools unless you can argue they are the same asset.

CryptoLens builds your Section 104 pools automatically from your on-chain transactions, applying the same-day and 30-day rules in the correct order. The Pro tax report exports your complete pool calculations for every token.