The UK tax authority has announced plans to change how cryptocurrency lending and liquidity pool arrangements are taxed, moving toward a “no gain, no loss” treatment for certain disposals. The policy is designed to defer capital gains tax until a participant makes what HM Revenue & Customs (HMRC) calls an “economic disposal.”
In a notice released on Monday, HMRC said the approach would apply starting April 6, 2027. The move is aimed at aligning tax outcomes with the underlying economics of crypto lending and decentralized liquidity arrangements, where investors may not realize a profit in the usual sense until they dispose of their crypto exposure.
Key takeaways
- HMRC plans to apply a “no gain, no loss” approach to certain disposals tied to crypto loans and liquidity pools from April 6, 2027.
- The change is intended to defer capital gains tax on digital assets until an “economic disposal,” rather than taxing interim events.
- HMRC expects the update to affect around 700,000 individuals and trustees.
- The policy contrasts with earlier HMRC guidance for crypto lending and liquidity pools issued in 2022 after consultation.
- UK capital gains tax rates for 2025–2026 remain in the 18% to 24% range depending on the taxpayer’s rate band, but the timing of when gains are recognized would shift for covered arrangements.
What HMRC is changing for crypto loans and liquidity pools
HMRC’s announcement focuses on “certain disposals” related to cryptocurrency lending and liquidity pool participation. Under the new approach, HMRC says it will treat covered transactions under UK capital gains rules as “no gain, no loss” for situations including acquisition and disposal of an interest in a lending arrangement in exchange for the same type of asset.
The tax authority also indicated that its treatment would extend to cases involving borrowed assets acquired at market value, as well as arrangements operating under similar conditions using automated market makers.
Why “no gain, no loss” is meant to defer tax
HMRC’s stated rationale is that taxing these activities immediately could produce results that do not reflect when economic benefit is actually realized. The authority said the measure supports fairness in the UK tax system and “aligns the tax treatment more closely with the economics of these arrangements” by recognizing gains and losses “only when the participant makes an economic disposal of the cryptoassets.”
In practical terms, the policy is aimed at reducing instances where taxpayers might face capital gains tax consequences from events that are not, from an investor’s perspective, a final exit from their economic position.
Industry feedback and the move away from older guidance
HMRC described the change as significant and connected it to a broader consultation period that followed the authority’s 2022 guidance on crypto liquidity pools and lending. The notice indicates that the update is expected to affect roughly 700,000 people and trustees.
While the precise boundaries of HMRC’s “certain disposals” will matter to taxpayers planning their activities, HMRC’s direction is clear: it intends to reduce administrative pressure on taxpayers by adopting an approach that better matches how crypto lending and liquidity participation are commonly structured.
Aave founder and CEO Stani Kulechov said in an X post on Monday that “This is the right direction,” adding that industry feedback suggested alternative approaches would create “significant admin burden for the tax payer.”
Tax rates remain, but the timing could change
UK rules for 2025–2026 set capital gains tax rates for crypto at between 18% and 24%, depending on whether the taxpayer falls within the basic-rate or higher-rate band, according to UK income tax rate guidance. HMRC’s announcement does not change these headline rates.
Instead, the key difference is when gains and losses would be recognized for covered lending and liquidity pool transactions. By deferring capital gains tax until an “economic disposal,” HMRC is effectively shifting attention from intermediate events within an arrangement to the point at which the taxpayer’s exposure is actually disposed of.
For investors, traders, and liquidity providers, this can matter as much as the headline tax percentage: timing can affect cashflow, how gains line up with other income, and how accurately tax reporting corresponds to realized outcomes.
Separately: a Solana community leader files to run in UK by-election
While HMRC’s announcement reshapes crypto taxation policy, UK politics is also seeing a crypto-adjacent candidate enter the spotlight. Reform leader Nigel Farage will face challengers in a by-election in Clacton following his resignation last week, after reports tied him to donations connected to the crypto industry.
On Tuesday, Stephen Newnham, described as the leader of the Solana community group Superteam UK, said he will run as an independent candidate against Farage and others. The by-election is scheduled for Aug. 13 and, according to reporting that includes non-traditional candidates, will also include comedian and author Jon Harvey in costume as Count Binface.
Farage’s resignation triggered the by-election, and the political narrative around his campaign includes allegations and reporting about financial contributions. Earlier coverage cited a $6.7 million donation connected to crypto billionaire Christopher Harborne, which Farage described at different times as both a “reward” related to the UK’s exit from the European Union and later as a “gift,” and also referenced other assistance linked to George Cottrell, described in that coverage as a convicted fraudster associated with a crypto casino.
For crypto participants in the UK, the next watch points are how HMRC will define and operationalize “certain disposals” and what it will consider an “economic disposal” in practice. With the new framework set to begin in April 2027, taxpayers and platforms alike should prepare for reporting changes and monitor further guidance that turns today’s principle into day-to-day compliance.
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