UK to defer crypto capital gains tax on lending and pools
The UK will delay capital gains tax on cryptocurrency lending and liquidity pools until an actual economic sale, relieving an administrative burden for an estimated 700,000 taxpayers.
The UK tax authority will defer capital gains tax on cryptocurrency lending and liquidity pools, adopting a "no gain, no loss" approach that only triggers levies upon an actual economic sale. HM Revenue and Customs (HMRC) confirmed the policy will take effect on April 6, 2027.
The shift replaces strict 2022 guidance that effectively penalized decentralized finance participants for routine technical transactions. Under current rules for the 2025-2026 tax year, investors face capital gains rates between 18% and 24% depending on their tax bracket.
By reclassifying these interactions, the government is removing a major barrier to participation in crypto markets. The new framework specifically covers acquiring or disposing of an interest in a lending arrangement for the same type of asset, borrowing at market value, and transacting with automated market makers.
An estimated 700,000 individuals and trustees will be affected by the change. “This is the right direction, mainly driven by the industry feedback demonstrating that any other approach would cause significant admin burden for the tax payer,” said Aave founder and CEO Stani Kulechov.
The administrative relief is substantial. Previously, investors moving assets into liquidity pools or lending protocols faced complex calculations to determine taxable events, even if they had not realized cash profits. “This measure will support fairness in the tax system,” said the UK tax authority. “It aligns the tax treatment more closely with the economics of these arrangements by ensuring that gains and losses are generally recognized only when the participant makes an economic disposal of the cryptoassets.”
Political dimension
The regulatory adjustment arrives alongside a growing crypto presence in UK politics. Reform leader Nigel Farage faces an Aug. 13 by-election in Clacton after reportedly accepting a $6.7 million donation from crypto billionaire Christopher Harborne, alongside financial assistance from George Cottrell, a convicted fraudster linked to a crypto casino.
Farage will face competition from Stephen Newnham, leader of the Solana community group Superteam UK, who announced his candidacy as an independent on Tuesday.
