Stakeholders in the British cryptocurrency industry are rallying behind policy wins such as the UK’s HMRC (His Majesty’s Revenue and Customs) A rubber-signed July 13 announcement that lending tokens or providing funds in liquidity pools will no longer trigger any capital gains tax liabilities.
From April 6, 2027, the new “No Profit, No Loss” (NGNL) scheme will be launched for approximately 700,000 UK crypto holders who use crypto loan facilities and liquidity pools.
In essence, taxes are not due until investors sell or exchange their tokens for value, eliminating the previous assumption that simply moving cryptocurrencies to a lending protocol or liquidity pool is an economic act in itself.
What has changed in the UK cryptocurrency tax system?
HMRC published a July 13 Policy Paper Addressing three scenarios.
When a cryptocurrency holder exchanges tokens for interest in the same asset type, HMRC treats the transaction on an NGNL basis, with the borrower treated as receiving the borrowed tokens at market value when the loan is taken out. Any collateral posted in the transaction is also allocated for CGT purposes.
The NGNL treatment applies even in automated market-making arrangements, where liquidity pools are operated by smart contracts, as long as the withdrawn amount equals the original deposit.
Calculations of gains or losses are triggered immediately on the difference if the user withdraws an excess or less amount of the tokens he entered.
Why did HMRC adjust its taxes on crypto loans and LPs?
The UK tax regulator said it had submitted Crypto tax base Change to correctly evaluate the context of transactions, so that users do not encounter exit scenarios until they actually exit the position.
The July 13 paper amends the Taxation of Chargeable Profit Act 1992 and follows up on HMRC’s 2022 guidance which has faced opposition from stakeholders due to the unnecessary paperwork it has caused.
Removing the deposit trigger takes one recurring fee off the table for DeFi users, although the UK will still charge for it Basic standard 18% and 24% for higher-rate taxpayers when they sell, trade or spend their cryptocurrencies, all of which are still considered dispositions.
Stakeholders welcome the change
Aave founder, Stani Kulichov, welcomed the move on X, writing HMRC “adopts new tax legislation relating to cryptocurrency lending and liquidity pools” and described the trend as valid. He said the result showed that industry responses could shape policy, and noted that any alternative approach would have increased the administrative burden on taxpayers.
Kilochov’s comments reflect Aave’s huge stakes in the lending market. DeFiLlama credits Aave with more than $13.3 billion of the approximately $38 billion total value locked (TVL) across cryptocurrency lending protocols.
The loan measure fell along with a Separate HMRC paper on stablecoins, published on the same day, which would exempt qualifying stablecoins from CGT for individuals and tax their interest-like returns as savings income. The measure is expected to affect about 1.2 million people, and will also come into effect in April 2027.
The final costs of the loan policy have not been published and will be examined by the Office for Budget Responsibility at a future fiscal event. HMRC said it did not expect any significant macroeconomic impact. The next thing to watch is the draft legislation itself, which will determine exactly which arrangements are eligible before the rules come into effect in April 2027.
