British crypto industry stakeholders are rallying behind a policy win as the UK’s HMRC (His Majesty’s Revenue and Customs) July 13 pronouncement rubber-stamped that lending tokens or supplying funds into liquidity pools no longer trigger any Capital Gains Tax obligations.
Starting April 6, 2027, a new “no gain, no loss” (NGNL) regime will kick off for the roughly 700,000 UK-based crypto holders using crypto loan facilities and liquidity pools.
In essence, taxes don’t come due until investors sell or swap their tokens for value, doing away with the earlier assumption that simply moving crypto into a lending protocol or a liquidity pool is an economic disposal in its own right.
What has changed in the UK’s crypto tax system?
The HMRC published a July 13 policy paper addressing three scenarios.
When a crypto holder swaps tokens for an interest in the same type of asset, HMRC treats the transaction on an NGNL basis, with the borrower treated as acquiring the borrowed coins at market value when the loan is taken out. Any collateral posted in the transaction is also set aside for CGT purposes.
The NGNL treatment applies even in automated market-making arrangements, where the liquidity pools are run by smart contracts, as long as the amount withdrawn is equal to the original deposit.
Gains or losses calculations are immediately triggered on the difference if a user withdraws an excess or less than the tokens they put in.
Why did the HMRC adjust its tax on crypto loans and LPs?
The UK’s tax regulator said it made the crypto tax rule change to properly assess the context of transactions, so that users don’t face exit scenarios until they actually exit a position.
The July 13 paper amends the Taxation of Chargeable Gains Act 1992 and follows up on HMRC’s 2022 guidance that faced stakeholder pushback over the unnecessary paperwork it caused.
Removing the deposit trigger takes one recurring charge off the table for DeFi users, although the UK will still charge its standard 18% basic-rate and 24% for higher-rate taxpayers when they sell, swap, or spend their crypto, all of which still count as disposals.
Stakeholders welcome the change
Aave founder Stani Kulechov welcomed the move on X, writing that HMRC “is adopting new tax legislation related to crypto lending and liquidity pools” and calling the direction correct. He argued the outcome showed industry feedback could shape policy, and noted that any alternative approach would have piled admin burden onto taxpayers.
Keluchov’s comments reflect Aave’s outsized stakes in the lending market. DeFiLlama credits Aave with more than $13.3 billion of the roughly $38 billion total value locked (TVL) across crypto lending protocols.
The loan measure landed alongside a separate HMRC paper on stablecoins, published the same day, which would exempt eligible stablecoins from CGT for individuals and tax their interest-like returns as savings income. That measure is expected to affect about 1.2 million people and also takes effect in April 2027.
Final costings for the loans policy have not been published and will be scrutinized by the Office for Budget Responsibility at a future fiscal event. HMRC said it expects no significant macroeconomic impact. The next thing to watch is the draft legislation itself, which will determine exactly which arrangements qualify before the rules bite in April 2027.