Summary
- The UK’s HM Revenue & Customs has declared that crypto deposits into DeFi lending platforms and liquidity pools will be classified as "no gain, no loss," postponing capital gains tax until a real asset sale occurs.
- This policy, announced on Monday and effective from April 2027, is designed to alleviate the excessive administrative burden stemming from HMRC's 2022 guidelines.
- Aave founder Stani Kulechov lauded the decision as a positive development, attributing the change to industry input.
The HM Revenue & Customs (HMRC) in the UK has officially stated that placing cryptoassets into DeFi lending protocols and liquidity pools will not be recognized as a taxable event, allowing for the deferral of any capital gains tax until an actual economic disposal of the assets occurs.
This adjustment, detailed in a policy document released on Monday, will take effect on April 6, 2027, and will modify the Taxation of Chargeable Gains Act 1992. HMRC estimates that around 700,000 individuals and trustees involved in crypto loans and liquidity pools will be impacted by this change.
HMRC's Approach to DeFi
Previously, according to HMRC's 2022 guidance, transferring tokens into a DeFi setup could be regarded as a disposal, which meant users faced potential capital gains tax liabilities before selling any assets. Feedback from stakeholders indicated that this created unnecessary administrative challenges, prompting the new regulations to better align taxation with the actual economic activities involved.
The new rules will apply a "no gain, no loss" framework to three scenarios: lending a single cryptoasset, borrowing one, and providing tokens to an automated market maker, which powers liquidity pools. Transacting in or out of these arrangements using the same asset will not trigger a tax event; gains or losses will only be recognized upon a true disposal, or in the case of liquidity pools, if a user withdraws a different amount of tokens than what was initially deposited. Additionally, collateral used for borrowing will not be subject to capital gains tax.
Industry Feedback and Response
This policy shift culminates a multi-year process, beginning with a 2022 evidence-gathering phase, followed by a consultation in 2023, and concluding with a summary of responses in the Budget 2025. It has garnered approval from prominent figures in the DeFi sector. Stani Kulechov, who founded the DeFi lending platform Aave, described the new approach as "the right direction" in a tweet, stating that any alternate treatment would have imposed a significant paperwork burden on taxpayers.
HMRC in the UK is adopting new tax legislation related to crypto lending and liquidity pools.
Main take is that deposits into lending protocols will be treated as ‘no gain, no loss’ (NGNL), which effectively defers capital gains tax until an economic disposal. Also underlying…
— Stani (@StaniKulechov) July 13, 2026
Kulechov highlighted this outcome as proof that industry input can influence policy decisions, likening it to the industry’s sway over a £20,000 cap on individual stablecoin holdings. He noted that the developing framework for DeFi tax regulations reflects the growth and maturity of the sector. Furthermore, he pointed to HMRC's separate plans to treat stablecoins more like traditional currency for tax purposes.
The final cost assessment of this measure still requires validation by the Office for Budget Responsibility, and implementation will not occur until April 2027, providing UK crypto users and the competing protocols ample time to adapt.