UK HMRC Says Crypto Lending Will Trigger No Capital Gains Tax Until Economic Disposal
HM Revenue & Customs (HMRC) has announced a new tax framework for decentralized finance (DeFi) activities in the UK, effective from April 6, 2027. Under the rules, certain disposals involving cryptoasset loans and automated market-making (AMM) liquidity pools will be treated on a “no gain, no loss” basis, deferring Capital Gains Tax (CGT) until the user makes an economic disposal of the underlying cryptoasset.
The measure applies to individuals and trustees and amends the Taxation of Chargeable Gains Act 1992. Currently, selling, swapping, or spending crypto can trigger CGT at rates of 18% for basic-rate taxpayers and 24% for higher-rate taxpayers. HMRC’s new approach narrows that treatment for specific DeFi arrangements where users transfer crypto into a lending protocol or liquidity pool without exiting their economic position.
The policy follows years of industry concern over HMRC’s 2022 guidance on crypto lending and liquidity pools. Stakeholders argued that the old interpretation created taxable events not matching the economic reality. HMRC opened a call for evidence in July 2022, followed by a consultation in 2023, and confirmed the new approach on July 13, 2026. The tax authority stated the change aims for fairness, recognizing gains and losses only when a participant makes an actual economic disposal.
The change is expected to affect about 700,000 individuals who use crypto loans or liquidity pool arrangements. HMRC said these users should benefit from a simpler framework.
The measure covers three main scenarios. For single cryptoasset lending, acquiring or disposing of an interest in exchange for identical cryptoassets will be treated as no gain, no loss. For borrowing, borrowed assets are treated as acquired at market value at borrowing time; when identical assets are returned, the borrower is treated as disposing of them for the same value. Collateral is ignored for CGT purposes. For AMM arrangements involving two or more qualifying cryptoassets, users also receive no-gain-no-loss treatment when contributing identical assets. On exit, the treatment applies only to the extent they receive the same quantity as originally invested; any difference creates a taxable gain or loss. HMRC said the measure is not expected to have significant macroeconomic impact.