HMRC Announces New Tax Rules for Crypto Lending and Liquidity Pools from 6 April 2027 

Crypto Lending and Liquidity Pools 

The UK Government has published draft legislation introducing new Capital Gains Tax (CGT) rules for cryptoasset loans and liquidity pools, with the changes due to take effect from 6 April 2027.

The proposed legislation aims to provide greater certainty for UK crypto investors participating in decentralised finance (DeFi). Once in force, many qualifying crypto lending and liquidity pool transactions will benefit from “no gain, no loss” treatment, meaning they will no longer trigger an immediate CGT charge simply because cryptoassets are temporarily transferred into a lending arrangement or liquidity pool.

For investors using platforms such as Aave, Compound, Uniswap, Curve, or similar DeFi protocols, this is a welcome development that should simplify tax reporting and better reflect the commercial reality of these transactions.

Why Are These Changes Being Introduced?

Until now, there has been uncertainty over whether transferring cryptoassets into a lending protocol or liquidity pool constituted a disposal for Capital Gains Tax purposes.

In some cases, depositing crypto into a protocol could potentially be viewed as exchanging one asset for another, resulting in an immediate CGT liability even though the investor had not sold their crypto or received any cash.

The new legislation is intended to remove this uncertainty by introducing a specific tax treatment for qualifying arrangements.

What Will Change from 6 April 2027?

From 6 April 2027, qualifying cryptoasset loans and liquidity pool arrangements will generally receive “no gain, no loss” treatment.

Where the statutory conditions are met:

• Depositing cryptoassets into a qualifying lending arrangement or liquidity pool will generally not be treated as a disposal for CGT purposes.
• Your original acquisition cost (base cost) will continue to apply.
• Any capital gain or loss will usually be deferred until the cryptoasset is ultimately disposed of.

This means investors should no longer face an immediate CGT charge simply because they have temporarily lent or deposited their cryptoassets.

Which Transactions Are Likely to Qualify?

Although the detailed legislation contains specific conditions, the new rules are expected to apply where:

• the cryptoasset is temporarily lent or deposited;
• the investor retains an economic interest in the underlying asset;
• an equivalent cryptoasset is expected to be returned; and
• the arrangement does not amount to a permanent exchange of ownership.

Examples may include:

• Lending ETH through Aave
• Lending USDC on Compound
• Depositing crypto into certain DeFi liquidity pools

Each protocol operates differently, so the tax treatment should always be reviewed on its own facts.

What Remains Taxable?

The new rules do not make crypto lending tax-free.

Lending Rewards

Interest earned from crypto lending will generally remain taxable as income when received.

This may include:

• Interest payments
• Lending rewards
• Liquidity mining rewards
• Governance token distributions

The taxable amount is generally based on the market value of the cryptoasset at the time it is received.

Future Capital Gains

Capital Gains Tax may still arise when:

• you dispose of the cryptoasset;
• you sell or exchange receipt tokens or LP tokens (where applicable); or
• the arrangement falls outside the scope of the new legislation.

Example

Sarah purchased 10 ETH for £15,000.

By April 2028, the ETH is worth £25,000, and she deposits it into a qualifying crypto lending protocol.

Under the new rules (effective from 6 April 2027)

• No immediate Capital Gains Tax is triggered.
• Sarah retains her original £15,000 acquisition cost.
• Any capital gain will only be calculated when the ETH is eventually disposed of.

This avoids creating a tax bill where no cash has actually been realised.

Why This Matters for UK Crypto Investors

These changes are a positive step for the UK crypto industry.

Once implemented, they should:

• Reduce unnecessary Capital Gains Tax charges.
• Provide greater certainty for DeFi users.
• Simplify tax reporting for qualifying lending arrangements.
• Better align the tax rules with the economic reality of crypto lending.

For many investors, this removes the concern that simply participating in DeFi could generate an unexpected CGT liability.

Keep Good Records

Although qualifying transfers may become tax-neutral from 6 April 2027, investors should continue maintaining comprehensive records of:

• deposits into lending platforms;
• withdrawals;
• liquidity pool transactions;
• rewards received;
• receipt or LP tokens issued; and
• any subsequent disposals.

Good record-keeping remains essential for completing an accurate Self Assessment tax return and responding to any HMRC enquiries.

Our View

The introduction of these rules is one of the most significant developments in UK crypto taxation for several years.

While the legislation provides welcome certainty, not every DeFi transaction will qualify for the new treatment. The tax outcome will depend on the legal and economic characteristics of the arrangement.

Investors using multiple DeFi protocols, liquidity pools or complex lending strategies should seek professional advice to ensure they understand both the income tax and Capital Gains Tax implications.

At MyCryptoTax, we specialise exclusively in UK crypto taxation and regularly advise clients on DeFi lending, liquidity pools, staking, NFTs, and other complex crypto transactions.

Need Help with Your Crypto Taxes?

Whether you’re investing in DeFi, staking, NFTs, liquidity pools, or crypto lending, our specialist team can help you navigate the latest HMRC guidance and ensure your tax reporting is accurate and compliant.

Contact MyCryptoTax today to discuss your crypto tax obligations and prepare for the new rules coming into effect from 6 April 2027.

Disclaimer: This article is for general information only and should not be relied upon as tax advice. The proposed legislation is due to take effect from 6 April 2027 and may be subject to change before implementation. Tax treatment depends on your individual circumstances, and professional advice should be sought where appropriate.

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© My Accountancy Team 2026 All Rights Reserved – The above articles are provided for guidance only and may not cover your personal circumstances so you should not rely on them. It is important that you seek appropriate professional advice which takes into account your personal circumstances where you can provide the full facts of the case and all documents related to your case. My Accountancy Team Ltd t/a mycryptotax.co.uk, cannot be held responsible for the consequences of any action or the consequences of deciding not to act.