Key facts
- UK's HM Revenue & Customs will implement a 'no gain, no loss' tax treatment for crypto lending and DeFi liquidity pool deposits.
- This policy change defers capital gains tax until users make an economic disposal of their cryptoassets.
- The measure takes effect April 6, 2027.
- It aims to reduce administrative burdens for users and align tax rules with the economic reality of DeFi transactions.
- The policy applies to lending, borrowing, and supplying tokens to liquidity pools.
The United Kingdom's HM Revenue & Customs (HMRC) has announced a significant shift in its tax policy regarding cryptocurrency lending and liquidity pools. Effective April 6, 2027, deposits into these decentralized finance (DeFi) arrangements will be treated under a 'no gain, no loss' (NGNL) framework. This means that capital gains tax will be deferred until an investor makes a genuine economic disposal of their assets, rather than being triggered by the act of depositing them into a protocol. This change addresses concerns raised by the industry about the disproportionate administrative burden imposed by HMRC's previous 2022 guidance, which treated such deposits as taxable disposals. The new rules are intended to align the tax treatment more closely with the economic realities of DeFi transactions and are expected to impact approximately 700,000 individuals and trustees. Stani Kulechov, founder of the DeFi lending protocol Aave, welcomed the move, highlighting it as a positive outcome of industry feedback.