The published regulation will come into force on April 6, 2027 and will cover individuals and fiduciaries entering into cryptoasset lending and liquidity pooling arrangements.
The change will affect around 700,000 people who make such transactions, according to the government's policy document. HMRC stated that users will benefit from a more understandable framework.
The new rules address three situations. The acquisition or disposition of an interest in a single crypto lending arrangement in exchange for crypto assets of the same type as the deposits will be treated on a no gain, no loss basis. Crypto assets borrowed in borrowing regulations will be deemed to have been acquired at the market value at the time of borrowing and the collateral will not be taken into account for Capital Gains Tax purposes.
In liquidity pools operating through smart contracts, that is, automatic market making arrangements, the user who acquires shares in exchange for the same type of crypto assets will be taxed on a no-gain, no-loss basis. On exit, this approach will be valid to the extent that the user receives the same amount that he initially deposited. Any difference between what is deposited and what is received will result in a gain or loss based on this difference. HMRC said the change brings tax treatment closer to the economic reality of these arrangements and only recognizes gain and loss when an economic disposal has occurred.
The regulation addresses issues arising from HMRC's own 2022 guidance. According to the tax administration, stakeholders had pointed out that the previous interpretation created a disproportionate administrative burden. The opinion collection process on the issue was carried out in July-August 2022, followed by a consultation process between 27 April and 22 June 2023. HMRC published a summary of the responses in the 2025 budget and outlined its approach at that time.
The UK's current tax regime views crypto as an investment asset. Sale, exchange or expenditure is considered a disposal for Capital Gains Tax purposes, and this tax is applied at 18 percent in the basic bracket and 24 percent in the upper bracket. The new regulation changes this disposal practice in certain lending and liquidity pool transactions. The final cost estimate will be subject to review by the Office for Budget Responsibility and will be released in a later fiscal period, according to the document. HMRC said it did not expect the regulation to have a significant macroeconomic impact.