The UK's HM Revenue & Customs (HMRC) has announced a major shift in how it taxes cryptocurrency used in decentralized finance (DeFi) lending and liquidity pools. Under the new policy, depositing crypto into DeFi protocols will be treated as a “no gain, no loss” event, deferring capital gains tax until an investor actually sells or otherwise disposes of the assets. The change, set out in a policy paper published on Monday, will take effect from April 6, 2027, and will amend the Taxation of Chargeable Gains Act 1992.
Previously, HMRC’s 2022 guidance considered moving tokens into a DeFi arrangement as a taxable disposal, potentially triggering capital gains tax even before a user had realized any profit. This led to what many called a disproportionate administrative burden. The new rules aim to align tax treatment with the true economic nature of the transactions, covering three scenarios: lending a single cryptoasset, borrowing one, and supplying tokens to an automated market maker (AMM). Entering or exiting these arrangements in the same asset no longer triggers a tax event; gains or losses arise only upon actual disposal, or if a liquidity pool withdrawal results in a different amount of tokens than deposited. Collateral posted to borrow against will also be disregarded for capital gains tax.
HMRC estimates the measure will affect around 700,000 individuals and trustees who use crypto loans and liquidity pools. The decision caps a multi-year consultation process stretching from a 2022 call for evidence to a 2023 consultation and finally to a summary of responses at Budget 2025.
Stani Kulechov, founder of the DeFi lending protocol Aave, praised the move as “the right direction,” crediting industry feedback for shaping the policy. He also highlighted separate HMRC plans to tax stablecoins more like money, signaling a maturing regulatory framework for the sector.
The final costing of the measure still needs certification by the Office for Budget Responsibility, but its delayed implementation until 2027 gives UK crypto users and the protocols that serve them over a year to adjust.
