The United Kingdom has signalled a major change in how it plans to tax DeFi, backing a “no gain, no loss” idea that could end so-called dry tax bills for everyday users.
The government, through HM Revenue & Customs, says it is developing rules to treat many DeFi loans and liquidity-pool moves on a no-gain/no-loss basis. This would delay capital gains tax until there is a real sale or swap, not just when tokens move in and out of a protocol.
The proposal was flagged alongside Wednesday’s Budget on 26 November and set out in a consultation outcome published this week.
BREAKING: UK proposes “No-Gain, No-Loss” tax rule for DeFi – deposits into lending or liquidity pools won’t trigger capital gains tax until actual disposal. Huge win for DeFi users in the UK.
pic.twitter.com/QDpb2kR8vr — Real World Asset Watchlist (@RWAwatchlist_) November 27, 2025
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Explaining HMRC’s “No Gain, No Loss” Plan
Officials say the goal is to align tax with how DeFi actually works and cut down on reporting that can hit users even when nothing has really been “sold.” Currently, people can face tax just for depositing tokens and later withdrawing the same ones.
HMRC says it is developing an approach that treats certain disposals as no gain, no loss, and it may extend this approach to automated market makers as well. The department adds that it will keep testing the case for changing the law. For now, this is a plan in motion, not a rule on the books.
HMRC’s guidance breaks DeFi usage into three areas: single-token setups, crypto loans, and automated market makers, also known as AMMs.
If you deposit and later withdraw the same single token, HMRC would still treat both actions as disposals. But they would fall under the “no gain, no loss” rule. That means there is no tax to pay at that moment. You only work out any profit or loss later, when you actually sell the tokens you received back.
When you use crypto as collateral to borrow, HMRC takes a lighter approach. Taking out the loan and locking up your tokens would not trigger capital gains tax.
The tax only comes into play if you sell the borrowed crypto and later buy it back to repay the loan. In that case, HMRC would calculate any gain or loss based on that buy-and-sell cycle.
For AMMs and other pools that involve more than one token, deposits would also be treated under the no gain, no loss rule. But things change when you exit. The tax position then depends on what you get back from the pool, and whether it matches what you originally put in.
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How is HMRC Handling Crypto Loans and Liquidity Pools Going Forward?
If users exit a pool with more or fewer tokens than they put in, the difference would count as a taxable gain or loss.
If users receive the same number back, HMRC treats the exit as “no gain, no loss,” and no tax is due at that point.
Industry participants told HMRC the current system is heavy on paperwork and often taxes outcomes that do not match what actually happened economically. Stakeholders submitted a total of 32 formal responses.
Most backed changes that would make the rules easier to follow and closer to how DeFi works in practice. HMRC said feedback during the process was “generally positive.”
The Budget papers confirm the government has published a summary of the DeFi tax consultation.
But they stop short of turning the “no gain, no loss” model into law. HMRC says it will build the new approach for individuals first, then look at whether to extend it to companies later.
The guidance also updates the wording to “cryptoasset loans and liquidity pools,” which brings both DeFi and centralised platforms under the same heading.
The push comes as enforcement steps up and many retail investors still struggle to tell when a crypto-to-crypto trade creates a tax bill.
HMRC has doubled the number of warning letters sent to suspected non-payers to about 65,000 in the 2024–25 tax year, a sign the agency wants clearer rules that people can actually follow.
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