The U.K. government is working on a new tax framework that could give decentralized finance (DeFi) users a break. Under proposals published this week, HM Revenue and Customs (HMRC) signaled support for a “no gain, no loss” (NGNL) approach to crypto lending and liquidity pool arrangements. Under the current system, when a DeFi user deposits funds into a protocol, even if to monetize those funds or take out a loan against them, the move could be treated as a disposal and trigger capital gains tax. The move ...

Core Insights - The UK Budget for 2025 does not introduce new crypto-specific taxes, maintaining the current tax structure for digital assets [2] - The capital gains tax (CGT) allowance remains low, leading to more reportable gains for crypto disposals, even for small retail portfolios [3] - HMRC is reconsidering its approach to DeFi lending and liquidity provision, responding to criticism of its previous guidance [5] Taxation and Regulation - The income-tax threshold freeze has been extended for three more years, which may push more active crypto traders into higher tax bands as wages increase [2] - Exchanges and platforms will be required to provide more detailed customer information to HMRC starting in 2026 [4] - The UK is advancing global data-sharing initiatives under new reporting standards [3] DeFi Lending and Staking - HMRC has shifted away from its strict stance on DeFi, acknowledging the administrative burdens imposed by current rules [5] - The department is moving towards a "no gain, no loss" framework for many DeFi transactions, rather than applying traditional disposal rules [5] - New regulations are expected to explicitly address automated market makers and multi-token liquidity pools, such as those used by Uniswap [6]