New ‘no gain, no loss’ rules mean moving crypto into lending protocols or liquidity pools won’t trigger a taxable event until actual cash-out
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byEditorial Team
Jul. 14, 2026
The UK government just made DeFi a lot less painful for taxpayers. New regulations announced on July 13, 2026 will treat certain crypto disposals involving lending protocols and liquidity pools as “no gain, no loss” events, effectively deferring capital gains tax until users actually sell or swap their tokens for real economic value.
The rules take effect on April 6, 2027, and apply to both individuals and trustees. Think of it like a tax-free zone for the act of depositing, not the act of profiting.
What the new rules actually change
Under previous UK tax guidance, moving crypto into a DeFi lending protocol or liquidity pool could technically count as a “disposal” for capital gains tax purposes. That meant users might owe tax the moment they deposited tokens, even though they hadn’t actually pocketed any gains.
The industry had a term for this: “dry tax” charges. You owed money on paper gains that existed nowhere except HMRC’s imagination.
The new framework fixes this by introducing a “no gain, no loss” classification for qualifying arrangements. The capital gains tax clock doesn’t start ticking until the user actually converts their crypto into cash, swaps it for a different token, or otherwise exits the position in a way that creates a real economic gain or loss.
To qualify, users need to maintain the right to reclaim the identical type and amount of tokens they deposited, along with any returns generated from lending or liquidity provision. This distinction matters because it separates passive DeFi participation from active trading.
The policy builds on consultations that HMRC began back in 2023, reflecting years of feedback from crypto industry participants who argued the old framework was unworkable and actively discouraged UK residents from participating in DeFi.
Stablecoins get their own carve-out
Separate legislative measures are in the pipeline to exempt stablecoins from capital gains tax in certain instances, also expected to take effect from 2027.
Worth noting: the UK government isn’t declaring open season on crypto taxes. Rewards earned from lending, staking yields, and actual sales of crypto assets remain fully taxable events. The new rules specifically target the structural problem of taxing deposits and withdrawals, not the profits themselves.
What investors should watch
The gap between announcement and implementation, July 2026 to April 2027, gives market participants time to prepare. Users entering DeFi positions now need to understand they’re still operating under the old rules until the effective date.
There’s a risk angle too. The “identical type and amount” requirement means impermanent loss, a well-known phenomenon in liquidity pools where the ratio of deposited tokens shifts due to price movements, could complicate qualification. If a user deposits 100 ETH into a pool and can only withdraw 95 ETH plus some other token, it’s unclear whether the NGNL treatment fully applies.
Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.
