The UK government announced an important change in the taxation of cryptocurrencies that promises to simplify the rules for investors who use decentralized finance (DeFi) protocols. HM Revenue & Customs (HMRC) confirmed that certain transactions involving cryptocurrency loans and liquidity pools will no longer be considered immediate taxable events for Capital Gains Tax (CGT) purposes.
The new rules will come into effect on 6 April 2027 and will apply to individuals and trustees who participate in lending contracts with cryptoassets or provide liquidity in DeFi protocols.
In practice, the measure establishes the concept of "no gain, no loss" for certain transactions. This means that the simple transfer of cryptocurrencies to a lending protocol or to a liquidity pool will not automatically generate capital gains tax. Instead, taxation will be deferred until an effective economic disposal of the asset occurs, such as a sale or exchange that results in real financial gain.
The rules cover three main situations. The first involves the acquisition or disposal of an interest in a cryptoasset lending contract when the investor receives assets of the same type as those originally deposited. In these cases, the transaction will be considered tax-neutral.
In the case of loans, the loaned assets will be considered acquired at market value at the time of the transaction, while any collateral provided will be disregarded for CGT calculation purposes.
In liquidity pools operated by smart contracts, the treatment will also be neutral when the user recovers the same amount of cryptocurrencies originally invested. If there is a difference between the amount invested and the amount returned, only that variation will be used to calculate any taxable gain or loss.
According to HMRC, the change seeks to align taxation with the economic functioning of DeFi protocols, preventing users from being taxed before they effectively realize profit from their assets.
The initiative responds to criticism made of the regime adopted in 2022, when industry participants argued that the existing guidance created an excessive administrative burden and taxed transactions that, in practice, did not represent an economic realization.
After public consultations held between 2022 and 2023, the British government decided to reform the tax treatment of these transactions. The proposal had already been previewed during the 2025 Budget, when HMRC published a summary of the contributions received from the industry.
The agency estimates that approximately 700 thousand people who use cryptocurrency loans and liquidity pools will benefit from the new rules, making compliance with tax obligations simpler.
Currently, the UK considers cryptocurrencies to be investment assets. Thus, sales, exchanges, or use of the assets normally constitute a disposal subject to Capital Gains Tax, with rates of 18% for basic-rate taxpayers and 24% for those classified in the upper bracket.