HMRC has published its formal response to the 2022–23 consultation on the taxation of cryptoasset loans and liquidity pools. After two years of evidence-gathering and technical workshops with industry, the direction is now explicit: the UK intends to move toward a “no gain, no loss” (NGNL) model for lending, single-asset arrangements, collateralised borrowing and automated market makers.
The reason is straightforward. Under current rules, every step inside a lending position or liquidity pool is treated as a disposal for Capital Gains Tax. Even simple activity can generate hundreds of micro-transactions, producing a computational burden that has nothing to do with the economic reality of the position. HMRC acknowledges this openly: the framework works on paper but not in practice.
The consultation shows broad agreement across industry, accountants, protocols and tax bodies. They all highlight the same point: DeFi activity should be taxed when you actually realise an economic gain, not every time a smart contract updates your token position. NGNL is the model that aligns best with this principle.
What HMRC is actually putting on the table
What’s different in this update is that HMRC finally shows you how an NGNL framework would operate in practice, rather than speaking only in principles. The response sets out three building blocks that together cover most real DeFi activity.
First, single-token lending: moving tokens into and out of a lending position would no longer trigger a chain of taxable disposals, because those steps would be treated on a no-gain-no-loss basis and any charge would arise only when you finally dispose of the asset.
Second, borrowing: if you borrow tokens, sell them, and later acquire the same type to repay the loan, CGT would apply solely to the economic difference between what you realised and what you paid to close the position.
Third, automated market makers (AMMs): instead of taxing every internal rebalancing, HMRC proposes a “reference quantity” approach. It works by comparing the amount of each token you withdraw with the amount you originally contributed. If you take out more units of a token than your reference amount, the excess is treated as a gain; if you take out fewer, the shortfall is treated as a capital loss. All other in-and-out movements are handled on an NGNL basis so that only the true economic change is taxed.
HMRC also defines the boundary of the regime by excluding securities, tokenised real-world assets and Proof-of-Stake validation, and confirms that the repo-style model explored earlier would create more complexity, not less. For the first time, you can see the outline of the regime the UK intends to legislate, not just the logic behind it.
What this changes for you right now
In practical terms, nothing in your 2024/25 tax obligations changes yet. HMRC’s document is a policy update, not legislation. You must still apply the current CGT rules:
crypto-to-crypto remains a taxable disposal;
rewards can be income or capital depending on their characteristics;
every entry and exit from a lending protocol or liquidity pool is a separate CGT event.
The administrative burden also stays exactly the same. HMRC confirms that individuals engaging with lending, LPs or AMMs already need specialist software to compute their tax position, and that this remains true even as the NGNL framework is developed.
Why this matters for your activity going forward
Even though the law has not changed, the logic of the future rules is now visible.
HMRC is designing a system where CGT arises when you economically exit a lending or liquidity position, not at every internal movement. For activity you start in 2025 and hold into 2026, the tax point may eventually be determined under this future NGNL structure.
This doesn’t change your reporting today, but it changes the relevance of the data you keep.
Whether under current rules or under NGNL, you must be able to show:
what you contributed to a pool;
the type and quantity of tokens you received back;
how those quantities shifted during your position;
and the base costs associated with each asset.
NGNL simplifies timing, not record-keeping. You still need a full audit trail of your transactions for HMRC to compute the final gain when you exit.
Getting your records ready with CryptoBooks
From here onward, the most useful step is keeping your onchain history clean and traceable. Focus on recording the exact tokens you contribute to a position, the amounts you receive back, and the intermediate movements that alter your exposure. These details determine your tax outcome today and will be the reference point when NGNL becomes the new framework.
CryptoBooks gives you a single place to import your wallets, reconstruct cost basis and maintain the audit trail needed for both current rules and the structure HMRC is shaping. You can create a free account, load your transactions and get your fiscal position in order for the 31 January deadline and for the years that follow.
