- The UK will defer capital gains tax on DeFi deposits starting April sixth, twenty twenty-seven.
- The reform applies to lending, borrowing, and liquidity arrangements for individuals and trustees.
- Approximately seven hundred thousand users are expected to benefit from the administrative relief.
The UK government will stop treating qualifying DeFi deposits as immediate disposals from April 6, 2027, deferring tax until users make a genuine economic exit from their assets. The change covers lending, borrowing and automated market maker liquidity arrangements.
The measure applies to individuals and trustees. HM Revenue & Customs estimates that about 700,000 users of crypto lending and liquidity pools could be affected.
Under the new treatment, moving tokens into an eligible lending protocol or liquidity pool will receive a “no gain, no loss” treatment. Users should not face an immediate CGT calculation when they deposit assets, provided the arrangement meets the qualifying conditions.
Free toolSubstantial Presence Test CalculatorThe tax bill has not disappeared. Selling, swapping or otherwise leaving a position can still create a taxable disposal later.
The government introduced the reform on July 13, 2026, alongside draft legislation for the Finance Bill 2026-27. Chancellor Rachel Reeves discussed the wider package in a Mansion House speech on July 14, 2026.
The relief covers three DeFi arrangements
The rules target arrangements where users retain an economic right to reclaim the same type and amount of cryptoassets. That condition underpins the treatment of protocol deposits as transfers rather than completed sales.
| DeFi arrangement | Treatment under the new framework | Remaining tax issue |
|---|---|---|
| Single cryptoasset lending | Deposit generally avoids an immediate disposal | A later economic exit may create a gain or loss |
| Single cryptoasset borrowing | Qualifying collateral is disregarded for CGT purposes | Disposal rules can apply when the position is exited |
| Automated market making | Liquidity-pool deposits can receive deferral treatment | Rewards and later disposals remain taxable |
The borrowing provision also disregards collateral for CGT purposes. That removes an immediate disposal concern when a user posts cryptoassets to support a qualifying loan.
HMRC said the policy is intended to bring tax outcomes closer to the economics of DeFi arrangements. Its policy statement said:
“This measure will support fairness in the tax system. It aligns the tax treatment more closely with the economics of these arrangements by ensuring that gains and losses are generally recognized only when the participant makes an economic disposal of the cryptoassets.”
The reform responds to the “dry tax” problem. Under 2022 guidance, transferring tokens into a smart contract could be treated as a disposal even when the user had not sold the asset or received cash.
Rewards remain taxable income
The deferral does not create a general exemption for returns generated through DeFi. Interest, staking yields and airdrops can still require reporting as income in the year they are received.
For the 2025–2026 context, DeFi rewards may face Income Tax of up to 45%. The treatment of the underlying tokens and the treatment of rewards remain separate questions.
The reform also leaves later disposals within the CGT system. A user who sells for fiat, swaps outside a qualifying DeFi context or otherwise exits in a way that realizes an economic gain may have to calculate the result then.
Rates cited for 2025–2026 are 18% for basic-rate taxpayers and 24% for higher-rate taxpayers. Those figures describe the existing tax context, not a new rate created by the DeFi measure.
Legislation follows a multi-year consultation
The reform follows a Call for Evidence issued on July 5, 2022, and a formal consultation held from April to June 2023. The draft Finance Bill 2026-27 amends the Taxation of Chargeable Gains Act 1992.
The legislation appeared on “L-Day,” identified as July 13, 2026. The rules are intended to apply from the start of the 2027–2028 tax year.
Stani Kulechov, founder of Aave, welcomed the direction on July 13, 2026. He said the previous treatment created a “significant admin burden for the taxpayer.”
Suzanne Morsfield, co-lead of the CryptoUK Tax Working Group, also welcomed the reform while calling for the UK to remain “competitive, coherent, and supportive of responsible innovation.”
Lucy Rigby KC MP, Economic Secretary to the Treasury, said at the FT Digital Asset Summit:
“Our goal is to minimize regulatory friction. Digital assets have the potential to bring about a complete transformation to the UK financial markets, resulting in efficiency improvements and faster capital flows.”
Reeves framed the wider package as an effort to “position the UK at the forefront of financial innovation.” She said the measures would provide the “certainty firms need to invest, innovate, and create high-skilled jobs.”
Other crypto measures are moving alongside the DeFi change
The government has also proposed treating eligible stablecoins more like money. The proposal could exempt those assets from CGT for individuals from April 2027, although it is separate from the DeFi deferral framework.
The UK’s Crypto-Asset Reporting Framework, or CARF, began implementation on January 1, 2026. The first exchange of platform data with HMRC is scheduled for 2027.
HM Treasury expects the broader CARF compliance effort to raise £315 million by 2030 through improved reporting. That projection concerns reporting and compliance, not revenue from the DeFi relief itself.
The same policy period includes plans for a first UK digital sovereign bond, known as a Digital Gilt, by early 2027. On July 14, 2026, Reeves announced the plan, while Bank of England Governor Andrew Bailey confirmed that the instrument could be used as collateral in market operations.
Those measures sit alongside the DeFi rules. A qualifying protocol deposit, a stablecoin transaction and a reward can each raise different tax questions.
Records will determine whether a deposit qualifies
The policy is aimed at arrangements where participants can reclaim the identical type and amount of tokens. That condition separates a qualifying transfer from a transaction that has economically disposed of the asset.
Users moving assets between protocols may gain administrative relief when transfers meet the rules. They may no longer need to calculate and report a gain each time they “hop” between protocols or add liquidity under a qualifying arrangement.
The relief does not remove the need to track transactions. Protocol terms, token amounts, dates, rewards and exit transactions can establish whether an arrangement met the conditions and when a later disposal occurred.
As of July 2026, the measure is scheduled to begin with the 2027–2028 tax year. HMRC’s estimate of 700,000 affected users includes individuals and trustees using lending and liquidity pools.
This article is for informational purposes only and does not constitute tax advice. Consult a qualified tax professional or CPA about your specific situation.
