Regulation of Stablecoin Staking. Photo by BeInCrypto
The UK’s latest budget leaves key crypto tax rules unchanged, but tightens the wider environment for traders.
Meanwhile, HMRC is signaling a major overhaul of how it taxes DeFi lending and liquidity provision.
Chancellor Rachel Reeves has not introduced any crypto-specific taxes in Budget 2025. There are no new levies on trading, holding or spending digital assets.
However, the budget extends the freeze on the income tax threshold for three years. As salaries rise, more taxpayers drift into higher brackets, including active crypto traders.
The Capital Gains Tax (CGT) allowance remains very low compared to historical levels. This means that more cryptocurrency sales are generating reportable gains, even for modest retail portfolios.
At the same time, the UK is continuing global data sharing under new reporting standards.
Exchanges and platforms will provide more detailed customer information to HMRC from 2026.
Alongside the Budget, HMRC published the results of a consultation on DeFi lending and staking. It responds to the strong criticism leveled against its 2022 guidelines in terms of loans and liquidity pools.
Stakeholders have told HMRC that the current rules create disproportionate administrative burdens. They warned that treating every DeFi move as a divestiture has little to do with economic reality.
In response, HMRC abandoned its earlier idea of copying the rules for pensions and share loans. It now prefers a framework based on “no gain, no loss” (NGNL) for many DeFi flows.
Fundamentally, the department recognizes that automated market makers represent a significant portion of the business. This indicates that any new rules should explicitly cover Uniswap-like multi-token liquidity pools.
HMRC now outlines a potential NGNL approach for three areas. These include single token agreements, crypto borrowing, and automated market makers.
For single token loans, the entry and exit from a platform could be NGNL for CGT. The actual gain or loss will only occur when the user finally sells the token.
For loans, the provision of guarantees and the subscription of tokens would be ignored by the CGT. Selling borrowed tokens and buying them back later to repay would crystallize the gain or loss.
For AMMs, HMRC offers NGNL processing when users deposit tokens for LP positions. The tax would then focus on differences in the number of tokens received upon release.
If users receive more tokens than they initially deposited, the excess counts as a win. But if they receive less, the shortfall is treated as a loss on their tax base.
HMRC emphasizes that this is still a “potential approach” and not enacted law. It will continue consultations before deciding whether to legislate.
One of the most controversial ideas was to treat all DeFi rewards as income. Respondents warned that this would ignore distinctions between capital and income and create dry tax burdens.
HMRC now says it is not actively pursuing an “all income” presumption rule. Rewards will continue to follow existing principles for the time being.
For spot traders on centralized exchanges, the budget does not bring any direct structural changes. CGT still applies to each transfer and income tax applies where the exchange amounts to a transaction.
However, the combination of frozen thresholds and low CGT allowances increases the effective tax burden.
More active traders will exceed reporting thresholds and face higher marginal rates on gains. HMRC expects more users to use portfolio tracking software to support their deposits.
Read original story What the latest UK budget means for crypto tax and DeFi access by Mohammad Shahid on beincrypto.com
