UK Proposes “No Gain, No Loss” Tax Rule for DeFi Lending & Staking: A Game-Changer for Crypto Investors in 2026

The UK government has unveiled a long-awaited proposal that would introduce a “no gain, no loss” tax treatment for many common DeFi activities including lending, borrowing, and providing liquidity. If implemented, the rule would defer capital gains tax (CGT) until an actual economic disposal occurs — eliminating the current situation where users face tax bills simply for moving assets between protocols.

What the “No Gain, No Loss” Rule Means for UK Crypto Users

Under the current HMRC guidance (updated 2021–2024), every time a user:

• Lends tokens on Aave, Compound, or similar platforms
• Adds or removes liquidity from Uniswap, Balancer, or Curve pools
• Stakes or unstakes assets

…it is treated as a taxable disposal, triggering CGT even when no real profit is realized.

The new proposal, published November 28, 2025, would:

1. Treat lending/borrowing and LP additions/removals as “no gain, no loss” events
2. Defer CGT until tokens are sold for fiat, swapped for materially different assets, or used to buy goods/services
3. Align UK tax treatment with the economic reality of DeFi yield farming and lending

This would bring the UK in line with more DeFi-friendly jurisdictions like Portugal, Germany (for holdings >1 year), and Singapore, while going further than the EU’s MiCA framework, which still leaves tax treatment to member states.

Which Activities Are Covered?

Likely included under “no gain, no loss”:

• Lending stablecoins or blue-chip tokens on Aave, Compound, Morpho
• Adding/removing liquidity on Uniswap V2/V3, Curve, Balancer
• Staking ETH on Lido, Rocket Pool (non-derivative staking)
• Restaking positions (e.g., EigenLayer) when no new asset is created

Likely excluded (still taxable events):

• Receiving and trading new governance tokens (e.g., UNI, CRV airdrops)
• Swapping between materially different assets
• Tokenized real-world assets (RWAs) classified as securities
• Yield-bearing tokens treated as new property (e.g., some stETH interpretations)

Timeline and Next Steps

• Consultation period runs until February 28, 2026
• Expected implementation for the 2026–2027 tax year (starting April 2026)
• HMRC may require additional reporting for high-volume DeFi users

2026 UK DeFi Tax Prediction: Massive Inflow Catalyst

UK DeFi tax prediction 2026: 150–300% growth in on-chain activity from UK wallets. Bull catalysts: No-gain-no-loss rule; bear risks: Complex reporting testing 100% adoption.

In summary, the UK’s proposed “no gain, no loss” DeFi tax rule — deferring CGT on lending, borrowing, and liquidity provision until true disposal — is being called the biggest tax win for UK crypto users since the 2014 VAT exemption, potentially triggering hundreds of percent growth in domestic DeFi activity from April 2026.