Effective from 6 April 2027, Capital Gains Tax (CGT) will only be payable when cryptoassets are economically disposed of, bringing much-needed clarity to the taxation of decentralised finance (DeFi) / block-chain financial transactions.
The new legislation replaces the widely criticised “dry tax” approach, which could trigger tax liabilities even when investors had not realised any cash proceeds.
What’s changing?
Under the new rules, simply moving cryptoassets into certain DeFi arrangements will no longer create an immediate CGT liability.
Transactions that will generally be treated as tax neutral include depositing crypto into:
- DeFi lending and borrowing protocols
- Liquidity pools
- Collateral arrangements
There are roughly 700,000 UK-based crypto holders using crypto loan facilities and liquidity pools.
Instead, CGT will only arise when there is an economic disposal of the asset, such as:
- Selling crypto for fiat currency
- Swapping one cryptoasset for another
- Withdrawing assets where there is a gain beyond the original holding
This “no gain, no loss” treatment means that taxes don’t become due until investors sell or swap their tokens for value, in contrast to the previous rules that simply moving crypto into a lending protocol or a liquidity pool is an economic disposal in its own right.
Income tax still applies to crypto rewards
While the CGT changes are welcome, HMRC has confirmed that many crypto earnings will continue to be taxed as miscellaneous income in the tax year they are received.
This includes:
- Staking rewards
- Mining income
- Airdrops (where taxable)
- Interest earned on crypto holdings
These receipts may be subject to Income Tax at rates of up to 45%, depending on the individual’s overall taxable income.
Why this matters
The reforms represent a positive step towards a more practical and proportionate tax framework for digital assets. Under the previous rules, investors could face tax bills despite having received no cash—creating liquidity challenges and uncertainty for those participating in DeFi.
By taxing gains only when an asset is genuinely disposed of, HMRC is acknowledging the unique nature of decentralised finance while providing greater certainty for taxpayers.
However, investors should not assume crypto tax reporting has become simpler. Detailed record-keeping remains essential, particularly for DeFi transactions, staking rewards, and other forms of crypto income.
Prepare for the new crypto tax rules
(and greater HMRC scrutiny)
The new rules take effect from 6 April 2027, giving investors and advisers time to prepare for the revised regime.
While the changes should reduce unexpected tax liabilities, accurate reporting of your crypto tax will become even more crucial as stricter reporting rules also take effect in 2027. HMRC will receive detailed information from crypto asset service providers, making it easier to identify unpaid taxes.
Therefore, if you have bought or sold crypto it may be necessary to review your transaction history, calculate any gains or losses and, if necessary, correct previous tax returns.
Need help with your crypto tax return?
Whether you’ve bought, sold, staked, mined, or invested in crypto through DeFi platforms, our experienced tax team can help you understand your UK tax obligations and accurately prepare your tax return or correct past tax returns.
We advise private investors on all aspects of cryptocurrency taxation and can help you navigate the latest HMRC rules with confidence.
Contact us today for a no-obligation discussion and a personalised quotation.
You can find out more about Tax on Crypto in our Guide here.
Oscar heads our tax department and provides advice on tax structuring, planning and compliance services to entrepreneurs and their businesses.
