On November 26, 2025, HM Revenue and Customs proposed a new “no gain, no loss” tax structure that would affect decentralized financial activities, including lending and liquidity provision, to eliminate quick capital gains tax triggers.
Before, putting tokens into DeFi protocols was considered a taxable disposal, which meant that users had to pay rates of up to 32 percent even if they didn’t make any real gains.
This made it difficult for people to get involved in a sector that is now significant to the UK’s fintech goals. The change defers taxes until users sell or dispose of assets, in a way that makes sense, and characterizes regular DeFi transactions as neutral swaps of assets with the same value.
Fixing the Tax Trap for Disposal
Before, DeFi customers had to pay “dry tax” on paper gains from putting tokens into lending platforms or automated market makers, even if they later withdrew assets of the same kind. If prerequisites such as token equivalence and retained economic ownership are met, the new method ignores them for capital gains tax purposes.
This includes single-asset loans, borrowing collateral, and pool contributions. This aligns taxes more closely with DeFi’s non-custodial nature, where users retain control even when protocols interact. This makes things easier and less complicated, which is what caused people to leave the country.
Scope Spans Lending, Staking, and Pools
The proposal covers important DeFi primitives, including loan tokens and the ability to recover them, multi-token liquidity pools, and collateralized borrowing arrangements that defer gain recognition until redemption or a final sale.
Rewards from staking or yields are still subject to income tax checks on a case-by-case basis, so there are no general exemptions that could lead to abuse. High-volume traders might still have to declare their trades, but overall compliance is much easier — no more keeping track of every deposit and withdrawal cycle for fake taxes.
Clarity Boost Gets Praise from Business
Crypto leaders dubbed it a “historic breakthrough” and a “major win,” complimenting how it connects old tax laws to blockchain technology.
This might make London a DeFi powerhouse after Brexit. Companies like Re7 Capital said the standards were better for compliance, but they also spoke with industry experts to ensure that tokenized real-world assets or securities were not included.
Critics point out that there are still some unclear points about enforcement, while supporters say it would encourage new ideas without hurting revenue.
What to Do Next After the Autumn Budget
HMRC promises to keep making improvements based on consultations from 2023 and the quiet 2025 Autumn Budget on crypto levies. Soon, legislation may be passed to make the framework official. Users must follow the disposal requirements for filings due in January 2026, but things should get easier for future activities as more people use the service.
This puts the UK ahead of its peers by balancing expansion with protections against evasion in a market where DeFi volumes are almost as high as those of traditional banking.
