The UK government has published draft rules that would stop eligible crypto lending and liquidity pool deposits from triggering an immediate capital gains tax charge.
Starting April 6, 2027, certain transfers into qualifying arrangements will receive no-gain, no-loss treatment. The original cost basis will carry into the new position, deferring any gain or loss until the participant makes an economic disposal.
Current HMRC guidance can treat the transfer of beneficial ownership into a DeFi lending protocol as a disposal, even when the user expects to receive the same type and quantity of crypto later. That approach can create a taxable event at the deposit stage and another calculation when assets are returned.
The new treatment will apply to individuals and trustees using eligible cryptoasset lending arrangements and automated market makers. It does not remove tax from profits or losses generated through those positions.
Liquidity Pool Withdrawals Taxed On The Difference
Depositing qualifying assets into an automated market maker will generally occur on a no-gain, no-loss basis when the user receives an interest representing rights to the same asset types supplied to the pool.
When the position is closed, the tax deferral will cover assets returned in the same quantities as the original deposit. Any excess or shortfall between the deposited and withdrawn quantities can produce a gain or loss.
The rules also cover single-asset lending arrangements where users transfer crypto in exchange for a right to receive the same asset type plus a return.
Borrowers will be treated as acquiring borrowed crypto at market value when the loan begins. Returning the same asset type will be treated as a disposal at that original value, while collateral supplied under the borrowing arrangement will be disregarded for capital gains tax purposes.
The structure targets transaction classification rather than the broader risks attached to DeFi lending and liquidity pools. Users will still need records covering deposits, withdrawals, rewards, asset quantities and later disposals.
The change separates the UK from tax proposals that focus primarily on applying new headline rates to realized crypto profits. Greece, for example, is preparing a 15% crypto capital gains tax while leaving the treatment of DeFi transactions dependent on its final legislation.
Draft Rules Enter Technical Consultation
The provisions form part of the draft Finance Bill 2026-27 legislation, with the technical consultation scheduled to close on September 7, 2026.
HMRC estimates that roughly 700,000 people participate in cryptoasset loans and liquidity pool transactions and could be affected by the changes.
The proposal follows a consultation launched in 2023 after the industry raised concerns about administrative burdens created by taxing transfers that did not reflect a completed economic exit.
The changes arrive as the UK prepares a broader crypto framework covering exchanges, custody, staking and lending. That regime is expected to take effect in October 2027, extending the country’s existing crypto regulatory perimeter beyond financial promotions and anti-money-laundering registration. Coinbase recently secured expanded UK authorization for derivatives and equities as exchanges prepare for wider rules covering trading, custody, lending and other crypto services.
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