The UK’s HM Revenue & Customs confirmed on July 13, 2026, that depositing cryptoassets into DeFi lending arrangements and liquidity pools will no longer count as a taxable disposal, deferring capital gains tax until an investor makes a genuine economic disposal of the underlying assets.
What Happened and Why It Matters
The change, set out in a policy paper published the same day, takes effect from April 6, 2027, and amends the Taxation of Chargeable Gains Act 1992. HMRC estimates it will affect roughly 700,000 individuals and trustees who use crypto loans and liquidity pools in the United Kingdom.
Under HMRC’s 2022 guidance, simply moving tokens into a DeFi arrangement could itself count as a disposal, leaving users facing capital gains tax on paper before they had sold anything. Stakeholder feedback said this created disproportionate administrative burdens relative to the underlying economics of these transactions.
The new rules apply “no gain, no loss” treatment across three specific scenarios, which are lending a single cryptoasset, borrowing a single cryptoasset, and supplying tokens to an automated market maker, the smart contract mechanism underlying most liquidity pools.
Entering or exiting these arrangements using the same asset type no longer triggers a tax event on its own. A gain or loss arises only on a genuine disposal or, specifically in a liquidity pool, if a user withdraws a different quantity of tokens than they originally deposited. Collateral posted to borrow against will also be disregarded entirely for capital gains tax purposes.
Industry Reaction
The change followed a multi-year process, running from a 2022 call for evidence through a 2023 consultation to the publication of a summary of responses at Budget 2025.
Aave founder Stani Kulechov publicly welcomed the approach, calling it “the right direction” and arguing that any other tax treatment would have saddled UK taxpayers with heavy paperwork for economic activity that hadn’t realized a gain or loss.
Kulechov also pointed to this as evidence that industry feedback can shape policy, drawing a comparison to a separate £20,000 cap on individual stablecoin holdings, which he said reflected similar industry input, and noted that HMRC has separate plans to tax stablecoins more like conventional money.
For broader context on how DeFi platforms are being adopted and regulated globally, our coverage of DeFi adoption growth tracks similar developments across other jurisdictions.
What Comes Next
The measure’s final costing still requires certification by the Office for Budget Responsibility, and it won’t take effect until April 2027, giving UK crypto users and the protocols competing for them more than a year to adjust.
What this means for you: if you’re a UK taxpayer using DeFi lending or liquidity pools, this doesn’t change your tax position today, since the rules don’t apply until April 2027, and nothing here should be read as guidance on how to handle your own filings. Anyone with cryptoasset holdings inside these arrangements should track how HMRC’s final guidance takes shape and speak with a qualified tax advisor before the rules take effect.
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