UK Simplifies Tax Rules for DeFi Lending and Liquidity Pools

The UK's HM Revenue & Customs has announced that depositing cryptoassets into DeFi lending arrangements and liquidity pools will no longer be considered a taxable disposal. This change, set to take effect from April 6, 2027, amends the Taxation of Chargeable Gains Act 1992.

The new rules apply 'no gain, no loss' treatment across three specific scenarios: lending a single cryptoasset, borrowing a single cryptoasset, and supplying tokens to an automated market maker. This means that entering or exiting these arrangements using the same asset type will no longer trigger a tax event on its own.

Aave founder Stani Kulechov welcomed the approach, calling it 'the right direction'. He argued that any other tax treatment would have saddled UK taxpayers with heavy paperwork for economic activity that hadn't realized a gain or loss. The change follows a multi-year process, which included a 2022 call for evidence and a 2023 consultation.

The new rules will affect approximately 700,000 individuals and trustees who use crypto loans and liquidity pools in the United Kingdom. HMRC estimates that it will save users time and administrative burdens relative to the underlying economics of these transactions.