What The Latest UK Budget Means For Crypto Tax and DeFi Access
The UK’s newest Budget leaves headline crypto tax guidelines unchanged however tightens the broader surroundings for merchants.
Meanwhile, HMRC indicators a significant rethink on the way it taxes DeFi lending and liquidity provision.
No New “Crypto Tax,” But Pressure Still Rises
Chancellor Rachel Reeves didn’t introduce any crypto-specific tax within the 2025 Budget. There is not any new levy on buying and selling, holding, or spending digital belongings.
However, the Budget extends income-tax threshold freezes for 3 extra years. As wages rise, extra taxpayers drift into greater bands, together with energetic crypto merchants.
The capital positive aspects tax (CGT) allowance stays very low in comparison with historic ranges. That means extra crypto disposals set off reportable positive aspects, even for modest retail portfolios.
At the identical time, the UK is pushing ahead with international data-sharing underneath new reporting requirements.
Exchanges and platforms will provide extra detailed buyer info to HMRC from 2026.
HMRC Backs Away From Its Hard Line on DeFi
Alongside the Budget, HMRC published a session final result on DeFi lending and staking. It responds to robust criticism of its 2022 steerage on loans and liquidity swimming pools.
Stakeholders advised HMRC that present guidelines create disproportionate administrative burdens. They warned that treating each DeFi transfer as a disposal bears little relation to financial actuality.
In response, HMRC has dropped its earlier concept of copying repo and inventory lending guidelines. It now prefers a framework based mostly on “no acquire, no loss” (NGNL) for a lot of DeFi flows.
Crucially, the division accepts that automated market makers symbolize a significant share of exercise. It indicators that any new guidelines ought to explicitly cowl Uniswap-style multi-token liquidity swimming pools.
Proposed NGNL Rules for DeFi Loans and Liquidity Pools
HMRC now outlines a possible NGNL method for 3 areas. These are single-token preparations, crypto borrowing, and automated market makers.
For single-token lending, coming into and exiting a platform may very well be NGNL for CGT. The actual acquire or loss would come up solely when the person lastly sells the token.
For borrowing, posting collateral and taking out tokens could be ignored for CGT. Selling borrowed tokens and later shopping for them again to repay would crystallise the acquire or loss.
For AMMs, HMRC proposes NGNL remedy when customers deposit tokens for LP positions. Tax would then deal with variations within the variety of tokens obtained after they exit.
If customers obtain extra of a token than they initially deposited, the additional counts as a acquire. But in the event that they obtain fewer, the shortfall is handled as a loss in opposition to their tax base.
HMRC stresses that that is nonetheless a “potential method,” not enacted legislation. It will proceed consultations earlier than deciding whether or not to legislate.
DeFi Rewards: No New “All Income” Rule – For Now
One of essentially the most controversial concepts was to deal with all DeFi rewards as earnings. Respondents warned that this is able to ignore capital versus income distinctions and create dry tax prices.
HMRC now says it isn’t actively pursuing an “all income” deeming rule. Rewards will proceed to comply with present rules for now.
What This Means for UK Crypto Traders
For spot merchants on centralised exchanges, the Budget brings no direct structural change. CGT nonetheless applies on every disposal, and earnings tax applies the place buying and selling quantities to a commerce.
However, the mix of frozen thresholds and low CGT allowances will increase efficient tax strain.
More energetic merchants will breach reporting thresholds and face greater marginal charges on positive aspects. HMRC expects extra customers to make use of portfolio monitoring software program to assist their filings.
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