Crypto14 July, 20263 min read
HMRC Gives No Gain, No Loss Treatment to UK Crypto Lending and Liquidity Pools From April 6, 2027
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HMRC adopts no gain, no loss for certain crypto lending, borrowing, and liquidity pools. CGT is deferred until disposal of assets, not taxed on each transaction.
HMRC shifts DeFi taxes
Britain’s tax authority HM Revenue & Customs (HMRC) announced Monday that qualifying crypto lending and decentralized finance (DeFi) liquidity pool transactions will receive "no gain, no loss" treatment beginning April 6, 2027, with Capital Gains Tax generally deferred until an "economic disposal" of the underlying cryptocurrency. The policy amends the Taxation of Chargeable Gains Act 1992 and applies to individuals and trustees participating in qualifying cryptoasset lending and liquidity pool arrangements, while HMRC said the change is intended to align tax outcomes with underlying economic substance. HMRC said the new rules cover cryptoasset lending arrangements where users exchanging cryptocurrency for an interest in the same type of asset will receive no-gain-no-loss treatment, and it also extends similar treatment to automated market maker arrangements, commonly known as liquidity pools.
HMRC estimates the new framework will affect approximately 700,000 individuals and said the revised approach should make the tax system easier to understand, while UK capital gains tax rates for 2025–2026 remain 18% for basic-rate taxpayers and 24% for higher-rate taxpayers. The policy paper also stated that final cost estimates for the measure will be reviewed by the Office for Budget Responsibility and disclosed during a future fiscal event, and HMRC added that the change is not expected to have a significant macroeconomic impact.
Industry backs the change
HMRC framed the shift as a move away from taxing interim events, saying the approach would defer capital gains tax "until an economic disposal" rather than when assets are temporarily transferred into lending arrangements or liquidity pools. In an X post on Monday, Aave founder and CEO Stani Kulechov said "This is the right direction," adding that industry feedback suggested alternative approaches would create "significant admin burden for the tax payer." Cointelegraph echoed HMRC’s rationale that the measure would "support fairness in the tax system" by ensuring gains and losses are generally recognized only when the participant makes an economic disposal of the cryptoassets.
The new framework is described as treating covered transactions under UK capital gains rules as no gain, no loss for situations including acquisition and disposal of an interest in a lending arrangement in exchange for the same type of asset, and it also covers borrowed assets acquired at market value and similar conditions with automated market makers. While the timing changes, the sources say the headline capital gains tax rates remain between 18% and 24% depending on the taxpayer’s rate band, and the key difference is when gains and losses are recognized for covered lending and liquidity pool transactions.
What stays taxable next
The sources emphasize that the reforms do not remove Capital Gains Tax obligations, instead changing when gains or losses are recognized for qualifying crypto lending and liquidity pool transactions.
Cryptonews.net says the revised framework delays CGT so that "taxation will generally be deferred until the investor permanently disposes of the underlying cryptoassets" or receives assets that differ from those originally contributed.
It also states that rewards earned through lending protocols or liquidity pools, including yield generated from participation, will continue to be taxed under existing income tax rules when received, and it notes that once investors eventually sell, exchange or otherwise economically dispose of their cryptoassets, Capital Gains Tax will apply under the normal rules.
The policy is tied to HMRC’s earlier consultation process, including a call for evidence in 2022 and a formal consultation in 2023 after stakeholders argued earlier guidance imposed disproportionate administrative burdens on DeFi participants.
Separately, the same set of sources links the crypto policy shift to UK politics by describing a by-election in Clacton scheduled for Aug. 13, where Reform leader Nigel Farage will face challengers after his resignation last week, and where Stephen Newnham of the Solana community group Superteam UK said he will run as an independent candidate against Farage and others.