HMRC on DeFi lending and staking: the rules that apply until 2027
HMRC's DeFi manual turns on beneficial ownership and on whether returns look like interest. Here is how it works before the 2027 changes.
If you or a UK client lend, stake or provide liquidity in DeFi, today's UK treatment can create a taxable disposal when tokens go in and another when they come out, even if you get the same tokens back. The returns can be income or capital depending on their character. Draft rules would soften this from April 2027, but only for some arrangements and not retrospectively.
Where the guidance lives
HMRC's Cryptoassets Manual covers DeFi lending and staking in the CRYPTO61000 section, split into income tax, corporation tax and chargeable gains chapters, last updated on 28 November 2025 [1]. The manual is HMRC's view of the law, not legislation, and it repeatedly says outcomes depend on the facts.
One starting point shapes everything else. HMRC does not regard DeFi lending returns as interest for tax purposes, because it does not treat cryptoassets as money or currency [2]. The return is simply the tokens you receive over the life of the arrangement beyond the principal you put in [2].
Step 1: did beneficial ownership pass?
For chargeable gains, the key question when tokens go into a lending or staking arrangement is whether the lender keeps beneficial ownership. HMRC points to whether the recipient can deal with the tokens as it wishes (ownership has likely passed) or is specifically restricted from doing so (likely not) [4].
If ownership passes, there is a disposal when the tokens are transferred [4]. How you value it depends on whether the amount you will get back is known. Where the future quantity is ascertainable, HMRC applies section 48 TCGA 1992 and values the right to future tokens at the sterling value at the loan date. Where it is not ascertainable, the lender holds a right of the kind recognised in Marren v Ingles, valued at market value [4]. If you receive different tokens in exchange, such as pool or receipt tokens, HMRC treats that as a token-for-token exchange [4].
Step 2: what happens on the way out
When the arrangement ends, there can be a second disposal. For an ascertainable return, receiving the tokens disposes of the right to receive them, with the acquisition cost being the value used when the loan was made [5]. For an unascertainable return, you dispose of the Marren v Ingles right, and HMRC notes that losses on that right may be set against gains from making the loan [5]. Withdrawing from a liquidity pool by giving up pool tokens is also a disposal, valued at the sterling market value of what you receive [5].
Step 3: income or capital?
The extra tokens you earn are not automatically income. HMRC looks at whether the return resembles interest, using factors such as whether it is known in advance, whether it is paid periodically, whether it comes from the borrower or platform rather than from selling assets, and how long the arrangement lasts [3]. A predictable, recurring return points to revenue; an uncertain return that comes from the disposal of assets points to capital [3]. No single factor decides it [3].
Staking rewards on proof-of-stake networks have their own page. If the staking is not a trade, the sterling value of tokens awarded is taxable as income when received, and that value becomes the acquisition cost for a later Capital Gains Tax disposal [6]. Whether staking is a trade depends on degree of activity, organisation, risk and commerciality [6].
Companies follow the corporation tax chapter of the same section, which applies the same nature-of-return analysis within the corporation tax rules [1].
- An individual deposits 10 ETH into a lending protocol where the protocol can use the tokens freely. ETH is worth 2,000 pounds; pooled cost is 12,000 pounds.
- Beneficial ownership likely passes, so there is a disposal. If the variable return makes the amount back unascertainable, the right received is valued at market value, say 20,000 pounds. Gain: 20,000 less 12,000 = 8,000 pounds.
- Six months later the individual withdraws 10.2 ETH worth 2,400 pounds each, 24,480 pounds in total.
- The extra 0.2 ETH is the return. If it resembles interest, it is income; if not, it falls into the capital computation on the disposal of the right.
- The 10.2 ETH received enter the pool at their sterling value at receipt.
What changes in April 2027
On 13 July 2026 HMRC published a policy paper and draft legislation treating certain disposals involving cryptoasset loans and liquidity pools as no gain, no loss, so that tax is deferred until an economic disposal [7]. It covers single-cryptoasset lending and borrowing and automated market-making arrangements, applies to individuals and trustees, and is to take effect from 6 April 2027 [7]. The paper does not deal with staking or with the income treatment of returns [7]. As of October 2026 the rules are still draft. Transactions before the start date stay under the manual's current approach.
What to do
- Inventory every DeFi position and record, for each, whether the protocol can use your tokens freely.
- Keep the sterling value at entry and exit for every deposit, withdrawal and pool or receipt token.
- Write down your income-versus-capital analysis for each return stream using HMRC's factors, and apply it consistently.
- Value staking rewards in sterling when received and add them to your pools at that value.
- Watch the Finance Bill: the 2027 rules may change before enactment, and they do not cover companies or staking as drafted.
Sources
- CRYPTO61000 - Decentralised finance: lending and staking: contents (HMRC)
- CRYPTO61110 - Decentralised finance: lending and staking: introduction (HMRC)
- CRYPTO61214 - Decentralised finance: lending and staking: Income Tax: nature of the return (HMRC)
- CRYPTO61620 - Decentralised finance: lending and staking: chargeable gains: making a DeFi loan (HMRC)
- CRYPTO61650 - Decentralised finance: lending and staking: chargeable gains: satisfaction of a DeFi loan and withdrawal of a stake (HMRC)
- CRYPTO21200 - Cryptoassets for individuals: Income Tax: staking (HMRC)
- Tax treatment of Cryptoasset Loans and Liquidity Pools (HMRC)
General information for finance teams, current as of publication. Not legal, tax or accounting advice.