UK HMRC adopts 'no gain, no loss' tax treatment for crypto lending, liquidity pools

HM Revenue & Customs will treat certain disposals involving cryptoasset loans and liquidity pools as "no gain, no loss," deferring Capital Gains Tax until a user makes an economic disposal of the underlying cryptocurrency.

The measure, published Monday, takes effect 6 April 2027 and applies to individuals and trustees entering cryptoasset loan and liquidity pool arrangements, according to the policy paper from the UK government.

The rules cover three scenarios.

An acquisition or disposal of an interest in a single cryptoasset lending arrangement in exchange for cryptoassets of the same type as those invested will be treated on a no-gain-no-loss basis.

Borrowing arrangements will treat borrowed cryptoassets as acquired at market value at the time of borrowing, with any collateral disregarded for CGT purposes. For automated market-making arrangements — liquidity pools operated through smart contracts — a user acquiring an interest in exchange for the same type of cryptoasset is taxed on a no-gain-no-loss basis. On exit, the treatment holds to the extent that the user receives the same quantity originally invested.

Any difference between what was invested and what is received triggers a gain or loss based on that difference. HMRC said the change aligns tax treatment more closely with the economics of these arrangements, recognizing gains and losses only when a participant makes an economic disposal.

UK crypto tax regime

The measure addresses problems arising from HMRC's own 2022 guidance.

Indeed, stakeholders had flagged that the earlier interpretation produced disproportionate administrative burdens, the tax authority said. A call for evidence ran from July to August 2022, followed by a consultation between 27 April and 22 June 2023.

On that 2023 consultation, which sought to align tax with economic substance by not treating crypto used in DeFi lending and liquidity pool arrangements as a taxable disposal. HMRC published a summary of responses at Budget 2025 and set out its approach at that time.

This week’s measure is expected to affect about 700,000 individuals who engage in cryptoasset loan and liquidity pool transactions, according to the paper. HMRC said users will benefit from an easier-to-understand framework.

The current UK tax regime treats crypto as an investment asset, with selling, swapping, or spending constituting a disposal for CGT at 18% for basic-rate and 24% for higher-rate taxpayers. The new treatment modifies that disposal treatment for certain lending and liquidity pool arrangements.

Per the notice, final costing will be subject to scrutiny by the Office for Budget Responsibility and set out at a future fiscal event. HMRC said the measure is not expected to have any significant macroeconomic impact.

The measure amends the Capital Gains Tax law for individuals and trustees under the Taxation of Chargeable Gains Act 1992.