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

The UK government has proposed a new tax treatment for certain cryptoasset lending and DeFi transactions. The proposal, announced by HM Revenue & Customs (HMRC), aims to simplify the tax treatment of these arrangements and provide greater certainty for taxpayers.

Under the proposal, depositing cryptoassets into qualifying lending arrangements or liquidity pools would no longer automatically trigger a capital gains tax event. Instead, the transaction would receive 'No Gain, No Loss' (NGNL) treatment, meaning any capital gain or loss would be deferred until the investor ultimately disposes of the cryptoasset in an economically meaningful transaction.

The proposal is intended to align the tax treatment with the economic reality of these arrangements, where investors often retain exposure to the underlying cryptoasset despite transferring it to a protocol. HMRC has published draft legislation and is seeking technical feedback before the rules are finalized.