HMRC treats crypto lending, liquidity pools as no-gain-no-loss

HM Revenue & Customs will treat certain disposals tied to cryptoasset loans and automated market-making liquidity pools as “no gain, no loss”, deferring Capital Gains Tax until an economic disposal of the underlying asset. The rules apply to UK individuals and trustees and take effect on 6 April 2027.

A policy paper published by HMRC sets out three specific scenarios. Where a user acquires or disposes of an interest in a single-crypto lending arrangement in exchange for the same type of cryptoasset, the transaction will be treated on a no-gain-no-loss basis. In borrowing arrangements, borrowed cryptoassets will be treated as acquired at market value at the time of borrowing, and any collateral provided will be disregarded for Capital Gains Tax purposes. For automated market-making liquidity pools run by smart contracts, acquiring an interest in exchange for the same type of cryptoasset will not be treated as a disposal for tax purposes; on exit, the no-gain-no-loss treatment applies only if the user receives the same quantity of tokens originally invested. Any difference between what was invested and what is received will trigger a gain or loss based on that difference.

The policy paper states the change responds to problems identified with HMRC guidance issued in 2022 and follows a call for evidence in July–August 2022 and a consultation held between 27 April and 22 June 2023. A summary of responses appeared at Budget 2025, and the new rules are set out in the recent publication.

HMRC expects the measure to affect about 700,000 people who participate in crypto lending and liquidity provision. The paper says final fiscal costing will be reviewed by the Office for Budget Responsibility and published at a future fiscal event, and it does not expect the change to have a significant macroeconomic impact.

Under current UK law, cryptoassets are treated as investment assets and selling, swapping or spending them can be a disposal for Capital Gains Tax, charged at 18% for basic-rate taxpayers and 24% for higher-rate taxpayers. The measure amends Capital Gains Tax provisions for individuals and trustees under the Taxation of Chargeable Gains Act 1992.