On 13 July 2026, HMRC published a policy paper setting out a new Capital Gains Tax treatment for cryptoasset loans and liquidity pools. Certain disposals inside these arrangements will be treated as "no gain, no loss", which defers the tax charge until you make a real economic disposal of the underlying cryptoassets.
The headline points:
The measure amends the Taxation of Chargeable Gains Act 1992.
It takes effect from 6 April 2027.
It applies to individuals and trustees only.
HMRC estimates it will affect around 700,000 people in the UK.
It covers three defined scenarios: single cryptoasset lending, single cryptoasset borrowing, and automated market making arrangements.
The legislation is still in draft and remains subject to technical consultation.
That last point is the one most widely misreported. Several outlets covered the announcement as though the tax on DeFi deposits had already been removed. It has not. Nothing about your 2025/26 or 2026/27 position changes as a result of this announcement.
The problem this measure is meant to fix
To understand why this matters, you need to understand what HMRC's existing position does to ordinary DeFi activity.
In 2022, HMRC published guidance setting out its interpretation of how existing law applies to cryptoasset loans and liquidity pools. The core of that interpretation is that when you transfer tokens into a lending protocol or a liquidity pool, you generally give up beneficial ownership of those tokens in exchange for a different right, typically a claim against the protocol or an interest in a pool. Under general CGT principles, that exchange is a disposal.
The consequence is a tax charge on a transaction where nothing has economically left your hands.
Worked example under the current treatment You bought 10 ETH for £15,000 in an earlier tax year. ETH is now trading at £2,400, so your holding is worth £24,000. You deposit all 10 ETH into a lending protocol, intending to withdraw the same 10 ETH plus a return in a few months. Under HMRC's 2022 interpretation, that deposit is a disposal: Deemed proceeds → £24,000 Allowable cost → £15,000 Gain → £9,000 Annual exempt amount (2025/26) → £3,000 Taxable gain → £6,000 Tax at 24% → £1,440 You now owe £1,440, payable by the following 31 January, on a transaction that produced no sterling, no realised profit, and no change in your economic exposure to ETH. If the price falls before you withdraw, you may end up paying tax on a gain you never actually banked.
This is what the industry has spent four years calling the phantom disposal problem, and it is the specific outcome the new measure is designed to remove.
The administrative side is arguably worse than the cash-flow side. A user who moves in and out of pools regularly can generate hundreds of deemed disposals in a year, each requiring a sterling valuation at the moment of the transaction, each feeding into pooled cost.
How we got here
The policy has been in development for four years:
July to August 2022: HMRC ran a call for evidence on the taxation of cryptoasset loans and liquidity pools.
April to June 2023: a formal consultation followed.
Budget 2025: HMRC published a summary of responses to the 2023 consultation and set out a potential approach to the issues raised.
13 July 2026: the measure was announced, with a policy paper and draft Finance Bill 2026-27 legislation.
HMRC has stated that it continued to engage with stakeholders on the design of the rules throughout that period. The stated policy objective is fairness: aligning the tax treatment more closely with the economics of these arrangements, so that gains and losses are recognised when a participant makes an economic disposal rather than when tokens move between technical structures.
Who is affected
The measure applies to individuals and trustees entering into cryptoasset loans and liquidity pool arrangements.
Two implications worth stating plainly:
Companies are not covered: the measure amends the CGT rules in TCGA 1992. If you hold cryptoassets through a UK company, the corporation tax treatment of your lending and pool activity is unchanged by this announcement. Any company-level alignment would need separate legislation.
Scale: HMRC's impact assessment puts the affected population at approximately 700,000 individuals engaged in cryptoasset loan and liquidity pool transactions. For context, that is a larger group than many mainstream reliefs reach, and it tells you that HMRC now regards DeFi participation as a mass-market activity rather than a fringe one.
HMRC's own equalities analysis, drawing on research commissioned in 2021, notes that cryptoasset owners skew significantly younger than the general adult population. The practical reading is that this measure lands on a population that is largely filing Self Assessment returns for the first few times in their lives, often without an adviser.
The three scenarios in detail
The draft rules do not create a general DeFi exemption. They define three specific arrangement types and set out a treatment for each. Anything falling outside those definitions stays under the existing rules.
1. Single cryptoasset lending arrangements
A Single Cryptoasset Lending Arrangement is one where an individual or trustee holds the right to receive back a number of qualifying cryptoassets (the invested cryptoassets) plus a return, in an arrangement that is economically equivalent to lending.
The treatment: where you acquire or dispose of an interest in such an arrangement in exchange for the disposal of cryptoassets of the same type as the invested cryptoassets, that disposal is treated on a no gain, no loss basis.
In practice this works in both directions. Entering the arrangement is NGNL. Exiting it and receiving back the same type of asset is NGNL. Your original base cost travels through the arrangement untouched.
Worked example under the new treatment
Same facts as before. You bought 10 ETH for £15,000. You deposit them into a qualifying lending arrangement when ETH is £2,400. Entry: treated as no gain, no loss. No CGT charge arises. Your £15,000 base cost carries into your interest in the arrangement. Exit: you withdraw 10 ETH. Again no gain, no loss. Your base cost of £15,000 attaches to the returned ETH. Later sale: you eventually sell the 10 ETH for £28,000. Now the gain crystallises: £28,000 less £15,000, so £13,000, taxed in the year of sale.
The total tax paid over the life of the position is not reduced. It is deferred to the point where you actually have proceeds to pay it with. That is the entire point of the measure, and it is worth being clear with clients that this is a timing change, not a giveaway.
Single cryptoasset borrowing arrangements
The borrowing side works differently, and this is where most summaries have been thin.
Where an individual or trustee borrows qualifying cryptoassets:
The borrowed cryptoassets are treated as acquired for market value consideration at the time of borrowing.
When cryptoassets of the same type are transferred back, the borrower is treated as disposing of them for an amount equal to that same value.
Separately, and importantly: any provision of collateral under a cryptoasset borrowing arrangement is disregarded for CGT purposes.
That collateral rule is a substantive change. Under current treatment, posting collateral can itself be analysed as a disposal, which is one of the more punishing features of the existing position for anyone borrowing against a long-held holding. Under the new rules, the act of posting collateral simply does not register for CGT.
Worked example
You borrow 20,000 USDC against a BTC position. At the time of borrowing, 20,000 USDC is worth £15,800. The borrowed USDC is treated as acquired for £15,800. The BTC you post as collateral is disregarded. No disposal, no charge. Later you repay 20,000 USDC. You are treated as disposing of it for £15,800, regardless of what USDC is worth in sterling at that moment. If you still hold the same borrowed tokens and hand them straight back, the acquisition and the deemed disposal are equal and no gain or loss arises. If instead you spent the borrowed USDC and later acquired replacement USDC at a different sterling cost, the return leg is still treated as a disposal at £15,800, which can produce a gain or a loss measured against the pooled cost of the tokens you actually returned.
Note what this does not do: it does not switch off CGT on the collateral if the collateral is actually liquidated. Disregarding the provision of collateral is not the same as disregarding its sale. If a position is closed out and your collateral is sold to discharge the debt, that is an economic disposal of your asset and it should be expected to fall outside the shelter. The draft clauses are the place to confirm exactly where that boundary sits.
Automated market making arrangements
The third scenario is the one the press has been loosely calling "liquidity pools". The draft rules use a narrower and more precise term.
An Automated Market Making Arrangement is an arrangement operated by way of a smart contract in which an individual or trustee holds interests comprising rights to two or more types of qualifying cryptoassets.
The treatment has two limbs.
On entry: where you acquire an interest in the arrangement in exchange for disposing of cryptoassets of the same type as the invested cryptoassets to which the interest relates, that disposal is on a no gain, no loss basis.
On exit: where you dispose of your interest and receive back cryptoassets of the same type, the disposal is NGNL to the extent that you receive the same quantity as you originally invested. To the extent the quantity received is more or less than the quantity invested, a gain or loss arises by reference to that difference.
That second limb is the crucial mechanic, and it is a neat piece of drafting. It means the tax follows what a liquidity provider actually experiences: the matched portion of your position is invisible for CGT, and the tax attaches to the divergence.
Worked example
You deposit 5 ETH and 12,000 USDC into a two-sided pool. Entry is no gain, no loss on both legs. Some months later you exit and receive 4.2 ETH and 14,500 USDC. ETH: you invested 5 and received 4.2. The 4.2 matched units are NGNL. The 0.8 ETH shortfall is where a gain or loss falls to be computed. USDC: you invested 12,000 and received 14,500. The 12,000 matched units are NGNL. The 2,500 surplus is where the tax consequence sits.
If you have provided liquidity before, you will recognise this as the tax system finally engaging with impermanent loss and pool rebalancing directly, rather than through two full deemed disposals at entry and exit.
The mechanics of exactly how the gain or loss on the difference is calculated, and how base cost is allocated between the matched and unmatched portions, are the details to read in the draft clauses. This is also the area where HMRC has signalled that the boundaries of which arrangements qualify are still being refined, so anyone with an unusual pool structure should treat the current text as provisional.
You invest. We take care of you accounting
What the measure does not do
It is as important to be clear about the gaps as the changes.
It does not change the treatment of rewards: the measure deals with disposals of the invested cryptoassets and of interests in arrangements. It does not rewrite how lending returns, liquidity mining rewards or staking rewards are characterised. If a return is income in your hands under existing principles, it remains income.
It does not apply to companies: as above, this is a CGT measure for individuals and trustees.
It does not create a general DeFi safe harbour: three defined arrangement types are covered. Wrapping, bridging, restaking, liquid staking derivatives and any structure that does not meet the definitions are not addressed and continue under existing rules.
It is not retrospective: transactions before the operative date are governed by the law and interpretation that applied at the time.
It does not remove your reporting obligation: deferral is not exemption. You will still need to track base cost through arrangements, potentially for years, in order to compute the eventual gain correctly.
Timing: what applies, and when
This is the part that matters most for anyone filing a return in the next eighteen months.
2025/26, online filing deadline 31 January 2027: current rules and the 2022 guidance apply.
2026/27, online filing deadline 31 January 2028: current rules and the 2022 guidance apply.
2027/28, online filing deadline 31 January 2029: the new no gain, no loss treatment applies to arrangements from 6 April 2027.
If you deposited into a lending protocol or a liquidity pool at any point during the 2025/26 tax year, that deposit is analysed under the existing treatment and may well be a disposal you need to report on the return due by 31 January 2027. The July announcement does not help you. Filing on the assumption that it does is the single most likely error to come out of this news cycle.
Positions that straddle 6 April 2027 are the open question. A loan or pool position entered in 2026 and closed in 2028 has an entry analysed one way and an exit analysed another. The policy paper does not set out the transitional treatment, so this is one of the specific things to look for in the draft clauses and in HMRC's eventual guidance. Anyone with a long-dated position spanning the date should not assume a clean answer yet.
The measure is still draft
Three reasons to keep the caveats in place.
Technical consultation: the draft Finance Bill 2026-27 clauses were published for technical consultation, reported as running to 7 September 2026. Technical consultation is where mechanics get changed, and the definitional boundaries here are exactly the sort of thing that moves.
The legislative process: draft clauses published in July are not law. They must pass through the Finance Bill process, and measures are amended, deferred and occasionally dropped at that stage.
The costing is not settled: the Exchequer impact table in the policy paper is blank. HMRC has stated that the final costing will be scrutinised by the Office for Budget Responsibility and set out at a future fiscal event. A measure whose fiscal cost has not yet been certified is a measure that can still be adjusted, particularly if the deferral turns out to be more expensive than expected.
HMRC has said it does not expect the measure to have significant macroeconomic effects, and has identified no operational impact for itself and no administrative impact on businesses. It intends to keep the measure under review through communication with affected taxpayer groups.
What to do now
Do not change your 2025/26 filing: the rules that apply to the return due by 31 January 2027 are the rules as they stand today.
Keep the records that the deferral will depend on: NGNL treatment works by carrying base cost through an arrangement. If you cannot evidence the original acquisition cost of tokens you deposited in 2026 when you dispose of them in 2029, the deferral is worth very little to you. That means preserving, per transaction: date and time, token and quantity, sterling value at the time, fees, wallet addresses and transaction hashes, and the identity of the arrangement.
Identify positions that will straddle 6 April 2027: these are the ones where the treatment is least certain and where advice will be most valuable.
Watch the consultation: if you operate an arrangement whose qualification is genuinely unclear, the technical consultation is the point at which that can be raised. HMRC has invited questions on the measure at digitalassets@hmrc.gov.uk.
Separate the deferral from the income question: the measure moves the CGT point. It does not tell you whether your lending return is income, and that analysis still has to be done.
Where Finbooks fits
A deferral regime is, in computational terms, harder than the regime it replaces. That is a counter-intuitive point but an important one.
Under the current treatment, a deposit into a pool is a disposal, it is priced at the moment it happens, and the position closes. Under NGNL, nothing closes. A base cost enters an arrangement in one tax year and has to come back out, intact and correctly attributed, in a different tax year, possibly several years later, having passed through a structure that may have rebalanced the quantities in the meantime. The AMM rules add a further layer, because the matched portion and the unmatched difference are treated differently within the same exit.
That is the work Finbooks is built for: reconstructing activity across exchanges, wallets, protocols and chains, valuing it in sterling, classifying each movement correctly, and carrying cost basis coherently through arrangements that span tax years is the core of the platform, not an add-on to it. The July announcement makes that continuity requirement structural rather than optional.
