UK Plans No-Gain No-Loss Tax Rules for DeFi Lending

Crypto News DeFi

UK Proposes No-Gain, No-Loss Tax Rules for DeFi Lending and Liquidity

Written by Aaron S.,

Editor-In-Chief

Last Updated: November 28, 2025

Key Takeaways

The UK government plans to delay capital gains taxes on DeFi lending and liquidity pools until users sell their original crypto assets;
HMRC’s proposed “no gain, no loss” rule aims to stop taxing DeFi activity until a clear sale creates profit or loss;
The proposal is under review, with HMRC working with stakeholders to decide if legislative changes are needed.

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UK Proposes No-Gain, No-Loss Tax Rules for DeFi Lending and Liquidity

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The UK government has outlined plans to adjust how taxes apply to people using decentralized finance (DeFi) services.

The proposed rules would delay capital gains taxes on crypto lending or liquidity pool activity until the original tokens are actually sold.

On November 26, HM Revenue and Customs (HMRC) suggested adopting a “no gain, no loss” principle. This would apply when someone lends a token and receives the same one back, borrows using crypto, or places assets into a liquidity pool.

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The goal is to avoid taxing these transactions until there is a clear sale that creates profit or loss.

Under the plan, gains or losses would be calculated only when liquidity tokens are redeemed. The calculation would compare the number of tokens the user originally put in with the number they get back.

At the moment, adding funds to a DeFi protocol can count as a taxable event, regardless of the reason.

Sian Morton, marketing lead at Relay protocol, called the plan a "meaningful step forward for UK DeFi users who borrow stablecoins against their crypto collateral". She also said it "moves tax treatment closer to the actual economic reality of these interactions".

The new approach is still under review. HMRC said it will keep working with stakeholders "to assess the merits of this potential approach, and the case for making legislative change to the rules governing the taxation of crypto asset loans and liquidity pools".

Recently, Switzerland's crypto tax data sharing under the Crypto‑Asset Reporting Framework (CARF) has been delayed. Why? Read the full story.