UK Proposes 'No Gain, No Loss' Tax Treatment for Select Crypto Transactions

The UK government has proposed a change in how certain crypto transactions are taxed. The plan aims to ensure investors aren't taxed for moving cryptocurrency into qualifying lending or liquidity pool arrangements.

HM Revenue & Customs (HMRC) has published a policy paper proposing to treat eligible cryptoasset loans and liquidity pool transactions as 'No Gain, No Loss' events for Capital Gains Tax purposes. This means that depositing cryptoassets into certain arrangements would no longer automatically trigger a capital gains tax event.

The proposal seeks to align the tax treatment with the economic reality of these arrangements, where investors often retain exposure to the underlying asset despite transferring it to a protocol. HMRC believes the current rules can create uncertainty because some transactions may be treated as disposals for capital gains tax purposes even though investors have not effectively exited their investment.

The proposed rules are expected to apply to individuals and trustees participating in qualifying cryptoasset lending and liquidity pool arrangements, but do not extend to every crypto transaction. The 'No Gain, No Loss' treatment means the transfer itself is not treated as a taxable disposal, with any capital gain or loss carried forward and recognised only when the cryptoasset is eventually disposed of.

The proposal forms part of the UK's efforts to provide greater clarity around the taxation of cryptoassets and decentralised finance activities. HMRC has published draft legislation and is seeking technical feedback before the rules are finalised, with the changes set to take effect from April 6, 2027.