DeFi Tax UK: Staking, Lending and Yield Farming

Start with the arrangement

DeFi tax treatment cannot be determined from labels such as staking, yield farming or lending alone. For a UK individual, two separate questions are important: whether ownership of an asset has been transferred, and whether a return has the character of income or capital. An arrangement can require consideration of both. [1] [2] [3]

This guide concerns individuals holding crypto outside a trade. Whether activity amounts to a trade is a separate factual question. Company and trust positions need their own analysis.

Ordinary staking rewards

HMRC's guidance on ordinary staking says that where the activity is not a trade, tokens awarded are taxable as miscellaneous income using their sterling value at receipt, with appropriate expenses taken into account. Holding the awarded tokens and later disposing of them may also have Capital Gains Tax consequences. [2]

Do not apply that statement automatically to every product marketed as staking. Establish what the arrangement actually does and what the return represents.

DeFi returns may be income or capital

HMRC's DeFi guidance says the nature of the return depends on the transaction's structure. Relevant considerations include whether the return is remuneration for a service or capital growth, whether it is agreed or speculative, and how it is paid or realised. No single label resolves the classification. [3]

For example, receiving tokens as remuneration for providing a service requires a different analysis from realising growth through disposal of an asset representing a position. These are distinctions to investigate, not automatic answers for every protocol.

Once the return is classified, apply the corresponding timing, valuation and reporting rules. Do not assume tax only arises when money is withdrawn to a bank account.

Lending liquidity pools and beneficial ownership

Under HMRC's published guidance, transferring beneficial ownership of tokens when lending or providing liquidity creates a disposal. The contractual terms matter. A recipient's freedom to deal with the tokens is a strong indicator that ownership has passed; restrictions may point the other way. [4]

Receiving a token representing your position does not by itself settle the analysis. Identify the rights obtained, assets given up, sterling values and any later changes. A withdrawal may involve disposing of those rights and acquiring assets, so keep the full transaction history rather than only the deposit and final balance.

Collateral and liquidation

Providing collateral also requires an ownership analysis. If beneficial ownership passes, HMRC's guidance treats that as a disposal. If ownership is retained, the initial provision is treated differently. The consequences of withdrawal or liquidation depend on that starting point. [5]

Do not assume a liquidation loss equals the fall in your portfolio value. Establish which assets or rights were disposed of and the applicable consideration and costs. Liquidation penalties are not automatically allowable deductions. [5]

Airdrops

HMRC distinguishes tokens received without providing anything in return and outside a trade from tokens provided in return for, or in expectation of, a service. The latter can be income; a later disposal can require a separate capital gains calculation. The conditions attached to the distribution matter. [6]

Records and calculations

Keep wallet addresses, transaction hashes, dates, quantities, sterling valuations, service-provider exports and the terms of the arrangements. Retain evidence of fees and explain missing data or assumptions. Transfers between your own wallets should be identifiable so that imports do not duplicate assets or invent disposals. [7]

Reconcile reward receipts with later disposals and distinguish each type of asset. Apply the relevant matching and pooling rules rather than treating every withdrawal as profit. For the wider capital gains framework, see crypto CGT and Self Assessment.

Software can organise transactions and calculations, but an automated label is not a substitute for reviewing the arrangement. Resolve ownership, valuation and missing-record questions before relying on the final report.

Announced changes from April 2027

HMRC's policy paper gives 6 April 2027 as the operative date for changes to specified cryptoasset lending, borrowing and automated market-making arrangements. It describes no-gain/no-loss treatment in qualifying situations. This is not a blanket exemption for every DeFi transaction. [8]

The transaction date, qualifying conditions and applicable legislation must be checked. Do not apply the announced treatment to earlier transactions merely because the assets remain in a pool. This guide describes the existing HMRC analysis; the reform section should be revisited before the new rules take effect.

Getting DeFi tax advice

Advice can help where records contain several protocols, LP or receipt tokens, liquidations or uncertain reward classifications. Provide the arrangement terms alongside the transaction data.

To enquire about help, visit our enquiry form. We review enquiries before sharing them with our accountancy partner where appropriate. The firm decides whether to accept your matter and agrees its fees with you.

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This guide is for general information only and does not constitute tax advice. Tax rules change and individual circumstances vary. Always consult a qualified tax adviser before making decisions about your tax position. Nothing on this website creates a professional relationship.

Sources

Last reviewed: 14 September 2026.

• [1] HMRC DeFi guidance
• [2] Ordinary staking CRYPTO21200
• [3] Nature of a DeFi return CRYPTO61214
• [4] Making a DeFi loan CRYPTO61620
• [5] Collateral CRYPTO61640
• [6] Airdrops CRYPTO21250
• [7] Cryptoasset records and disposals
• [8] Tax treatment of cryptoasset loans and liquidity pools

HMRC material is available under the Open Government Licence v3.0.

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