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UK plans “no gain, no loss” tax treatment for DeFi lending deposits
HMRC says the change will apply from 6 April 2027 and aims to fix a rule from 2022 that could trigger capital gains tax when users moved tokens into DeFi.
UK tax authorities will treat deposits of crypto into decentralized finance lending protocols and liquidity pools as “no gain, no loss,” deferring capital gains tax until an investor makes an actual economic disposal, according to Decrypt.
The policy, published by HM Revenue & Customs, takes effect from 6 April 2027 and will amend the Taxation of Chargeable Gains Act 1992.
HMRC estimates the update will affect around 700,000 individuals and trustees who use crypto loans and liquidity pools, after stakeholder feedback said HMRC’s 2022 guidance created disproportionate administrative burdens by treating certain token transfers as taxable disposals on paper.
Under the new approach, HMRC says the “no gain, no loss” treatment will apply to three specific cases, including lending a single cryptoasset and supplying tokens to an automated market maker, the smart-contract engine behind liquidity pools, with tax generally arising only on real disposals or on withdrawals that differ from initial deposits.