HMRC Defers Capital Gains Tax on Crypto Liquidity Pools Under New 2027 Framework
The U.K. is set to ease the tax treatment of some decentralized finance activity, giving crypto users a clearer framework for lending and liquidity pool transactions.
HM Revenue & Customs said certain disposals involving cryptoasset loans and automated market-making liquidity pools will be treated on a “no gain, no loss” basis from April 6, 2027. The change means Capital Gains Tax will generally be deferred until a user makes an economic disposal of the underlying cryptoasset.
The measure applies to individuals and trustees and will amend the Taxation of Chargeable Gains Act 1992.
Under the current regime, selling, swapping or spending crypto can trigger Capital Gains Tax. The rate is 18% for basic-rate taxpayers and 24% for higher-rate taxpayers. HMRC’s new approach narrows that treatment for specific DeFi arrangements where users may transfer crypto into a lending protocol or liquidity pool without actually exiting their economic position.
HMRC Targets DeFi Tax Complexity
The policy follows years of industry concern over HMRC’s 2022 guidance on crypto lending and liquidity pools. Stakeholders argued that the old interpretation could create taxable events that did not match the economic reality of the transaction.
HMRC opened a call for evidence in July 2022, followed by a consultation in 2023. It published a summary of responses at Budget 2025 and confirmed the new approach on July 13, 2026.
The tax authority said the policy objective is fairness. Gains and losses should generally be recognized only when a participant has made an actual economic disposal of cryptoassets.
The change is expected to affect about 700,000 individuals who use crypto loans or liquidity pool arrangements. HMRC said those users should benefit from a framework that is easier to understand and engage with.
Lending and Liquidity Pool Rules Defined
The measure covers three main scenarios.
For single cryptoasset lending arrangements, acquiring or disposing of an interest in exchange for cryptoassets of the same type as those invested will be treated on a no-gain-no-loss basis.
For borrowing arrangements, borrowed cryptoassets will be treated as acquired at market value at the time of borrowing. When assets of the same type are returned, the borrower will be treated as disposing of them for the same value. Any collateral provided will be ignored for Capital Gains Tax purposes.
For automated market-making arrangements, such as smart contract liquidity pools involving two or more qualifying cryptoassets, users will also receive no-gain-no-loss treatment when they contribute the same type of assets.
On exit, the treatment applies only to the extent that they receive the same quantity as originally invested. Any difference will create a taxable gain or loss. HMRC said the measure is not expected to have a significant macroeconomic impact.
