The UK government has introduced draft tax regulations addressing crypto lending, liquidity pools, and stablecoins, with key changes planned to begin in April 2027. The proposals include deferring Capital Gains Tax on qualifying crypto loans until an economic disposal, affecting an estimated 700,000 individuals and trustees.

Tax Deferral for Crypto Lending and Liquidity Pools

Currently, HMRC treats the transfer of beneficial ownership of tokens in lending or DeFi arrangements as a taxable disposal, potentially triggering a tax obligation even without asset sale for cash. The new draft rules aim to better reflect the economic reality by allowing certain transfers of crypto tokens to be treated on a no gain, no loss basis. This defers Capital Gains Tax until the tokens are economically disposed of. The proposal covers single cryptoasset lending and borrowing agreements, as well as automated market-making arrangements requiring interests in at least two qualifying cryptoassets.

Under these rules, borrowed tokens would be acquired at their market value at the start of borrowing, and returning the same asset type would use that original acquisition value for calculating disposals. Collateral movements under qualifying borrowing arrangements would be excluded from Capital Gains Tax calculations. These reforms would apply from April 6, 2027, to individuals and trustees but exclude companies.

Stablecoin Tax Relief and Enhanced HMRC Powers

The draft also proposes Capital Gains Tax exemptions for disposals of eligible stablecoins, while related interest-like returns might be taxed as savings income. Bitcoin is excluded from these stablecoin tax relief rules. also the government plans to expand HMRC’s information-gathering powers and implement CARF reporting requirements to increase oversight of crypto transactions. These transparency measures would take effect following Royal Assent.

The consultation period for these draft rules opened on July 13, 2026, and will close on September 7, 2026. Legislation based on these proposals is expected to be introduced to Parliament afterward. This initiative is part of a broader effort to modernize crypto taxation and aligns with recent regulatory trends.

Material is for informational purposes only and does not constitute financial advice.