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The UK tax authority, His Majesty’s Revenue and Customs (HMRC), has officially introduced the “no gains, no loss” (NGNL) rule to reform taxation in decentralized finance (DeFi) protocols.
Dubbed the “Tax treatment of cryptoasset loans and liquidity pools,” the legislation overhauls the highly criticized 2022 “dry tax” model, which triggered tax liabilities with every token transfer.
No crypto capital gains tax until you sell
Starting April 6, 2027, the new model will defer Capital Gains Tax (CGT) for about 700,000 DeFi users. Here is a breakdown of the core aspects of the framework:
First, the NGNL rules will apply to crypto assets deposited into interest-bearing protocols, liquidity pools, or as collateral.
Secondly, HMRC will classify shifting tokens using smart contracts as a “tax-neutral” event. A truly taxable event will occur only when there is “economic disposal.” This essentially refers to selling crypto assets on an exchange, swapping them for other assets, or withdrawing more assets than one initially deposited into a liquidity pool.
Third, the revenue agency will consider any staking yields, mining returns, airdrops, interest, rewards, and even job payments as miscellaneous income. This will make them subject to Income Tax of up to 45% in the year they are received.
Finally, the legislation will incorporate strict crypto transaction tracking to eliminate any tax disputes. In November 2023, the UK committed to integrating the Organization for Economic Co-operation and Development (OECD) framework known as CARF (Crypto-Asset Reporting Framework). Starting in 2027, HMRC will expect transaction history data from crypto platforms to verify which assets qualify for NGNL deferral.
HMRC in the UK is adopting new tax legislation related to crypto lending and liquidity pools.
— Stani (@StaniKulechov) July 13, 2026
Main take is that deposits into lending protocols will be treated as ‘no gain, no loss’ (NGNL), which effectively defers capital gains tax until an economic disposal. Also underlying…
The outlook
Compared to the previous model, the new guidelines are much leaner, reducing massive paperwork for both DeFi users and the tax authority. They are also aligned with the Financial Conduct Authority (FCA) multi-year goal of positioning the UK as a competitive global crypto hub.