Taxation of cryptoassets: L-day developments

On 13 July 2026, HMRC published draft legislation for the 2026/2027 Finance Bill together with a number of supporting documents and consultations. A number of these will impact the taxation of cryptoassets, cryptoasset investors and those who support the cryptoasset industry. In particular, the government has published proposals for the reform of the tax treatment of stablecoins and cryptoasset lending and liquidity pools, whilst also extending HMRC’s tax information powers in relation to digital assets and data.

Taxation of stablecoins

In spring 2026, the government published a Call for Evidence on the tax treatment of stablecoin. Stablecoin are currently treated in the same way as other cryptoassets for tax purposes. However, with their potential to play a more significant role in both wholesale and retail payments in the future, the consultation raised the question whether this treatment is appropriate going forward and, if not, what changes should be made. The government has now published a response to its Call for Evidence together with draft legislation for inclusion in the Finance Bill later this year.

Stablecoins are a type of cryptoasset designed to maintain a stable value, usually by reference to a fiat currency such as the US dollar. Respondents to the Call for Evidence overwhelmingly supported the suggestion that the tax treatment of stablecoin should be reformed to facilitate its use with a large majority in favour of treating stablecoins more like money. There was also overwhelming support for including non-sterling stablecoins in the reform, given that US dollar denominated stablecoin dominate current usage.

As a result, the government will include legislation in Finance Bill 2026/2027 which will have effect from April 2027. For the purpose of the changes, eligible stablecoin will be defined as cryptoassets that maintain a stable value in relation to a particular fiat currency, with a sufficient amount of fiat currency or other assets held for the purposes of supporting that stable value and where the stablecoin is designed to be used as a means of payment or settlement. The government plans to assist taxpayers by setting out in guidance its view of whether the largest stablecoins currently in use are eligible stablecoins.

For individuals, eligible stablecoin will be exempt for CGT purposes and any interest-like returns from eligible stablecoins will be taxed as interest. For corporation tax purposes, changes will be made to the loan relationship rulues to ensure that eligible stablecoin will be treated as a money debt and, where eligible stablecoins are lent, this will be treated as a transaction for the lending of money. In addition, the measure will ensure that where a cryptoasset is issued representing the rights of creditors in respect of a money debt or security for such a debt, the debt is treated as arising from a transaction for the lending of money. The draft legislation only addresses the direct tax position of stablecoin, and does not deal with other tax considerations such as VAT.

Cryptoasset loans and liquidity pools

The government previously published a Call for Evidence in 2022 and a consultation in 2023 on the tax treatment of Decentralised Finance (DeFi) transactions involving the loaning and staking of cryptoassets. In particular, the government was responding to concerns around the tax charge that can arise where lending or staking of cryptoassets leads to a transfer of beneficial ownership in circumstances where, economically, investors do not consider that such a transfer has taken place. The consultation proposed the introduction of legislation to disregard transactions that arise through the lending or staking of relevant cryptoassets with the taxation of lending or staking of cryptoassets broadly following the tax regime for repo and stock lending transactions. In addition, the government suggested that rules would be introduced to provide that all returns from cryptoasset lending and staking transactions are treated as revenue returns to be taxed under a new miscellaneous income head.

A response to the consultation was published as part of Budget 2025. This confirmed that, following extensive consultation and stakeholder engagement, HMRC was considering a new approach to the tax treatment of cryptoasset loans and liquidity pools, with the aim of better aligning tax outcomes with the economic substance of these transactions. The proposed approach centred on treating certain disposals within cryptoasset loan and liquidity pool arrangements on a ‘no gain, no loss’ (NGNL) basis for CGT purposes.

The government has now announced that legislation will be introduced in the Finance Bill 2026/2027 having effect from 6 April 2027. The new rules will provide specific CGT rules in relation to three scenarios:

Single Cryptoasset Lending Arrangements: Single Cryptoasset Lending Arrangements are where an individual or trustee has a right to receive a number of qualifying cryptoassets (the invested cryptoassets) and a return, which is economically equivalent to a lending arrangement. An acquisition or disposal of an interest in a Single Cryptoasset Lending Arrangement for the disposal of cryptoassets of the same type as the invested cryptoassets will be treated as being on a no gain, no loss (NGNL) basis.

Single Cryptoasset Borrowing Arrangements: Where an individual or trustee borrows qualifying cryptoassets, the borrowed cryptoassets will be treated as being acquired for market value consideration at the time of the borrowing. Furthermore, when cryptoassets of the same type are transferred back, the individual or trustee will be treated as disposing of the cryptoassets for an amount equal to that value. Any provision of collateral under the cryptoasset borrowing arrangements will be disregarded for the purposes of CGT.

Automated Market Making Arrangements: Automated Market Making Arrangements are arrangements operated by way of a smart contract in which an individual or trustee has interests comprising rights to two or more types of qualifying cryptoassets (the invested cryptoassets). Where the individual or trustee acquires an interest in the arrangements in exchange for the disposal of cryptoassets of the same type as the invested cryptoassets to which the interest relates, the disposal will be on a NGNL basis. Where the individual or trustee disposes of an interest in the arrangement and acquires cryptoassets of the same type as the invested cryptoassets to which the interest relates, the disposal is treated on a NGNL basis to the extent that the individual or trustee receives cryptoassets of the same quantity as those original invested. To the extent that the number of cryptoassets received is more or less than the quantity originally invested, a gain or loss will arise by reference to that difference.

However, the government notes in its stablecoin response document that it is necessary to ensure that gains and losses on exempt assets, such as stablecoins, cannot be rolled over into non-exempt assets and vice versa. As a result, modifications to the proposal on the treatment of cryptoasset loans and liquidity pool proposals have been made to prevent NGNL treatment in these circumstances.

The government continues to consider the application of withholding tax to the lending and borrowing of stablecoins and whether the new rules for cryptoasset loans and liquidity pools should have retrospective effect for a limited period. The measures will generally be welcome for relevant individuals and trustees, as they will clarify the basis for UK taxation of relevant transactions and provide a tax outcome that better aligns with economic substance. It is worth noting that corporation tax payers will not be affected by the proposals.

Tax information and inspection powers

HMRC are introducing a number of reforms to its civil information and inspection powers, some of which will impact financial service and cryptoasset service providers, who may be asked to provide information and documents for the purpose of checking the tax position of a taxpayer. In particular, the changes to be introduced include:

Expanding FIN to cryptoasset service providers: Financial Institution Notice (FIN) legislation gives HMRC the power to require financial institutions to provide information to HMRC that it reasonably requires for the purpose of either checking the tax position of a known taxpayer or collecting a tax debt of the taxpayer. The FIN was introduced to allow the UK to meet international minimum standards on the exchange of information for tax. The government now proposes that these rules should be expanded to also cover cryptoasset service providers. As well as helping HMRC close the tax gap, the expansion supports the implementation of the OECD's Crypto-Asset Reporting Framework (CARF), which requires UK and international service providers to automatically collect and report detailed user and transaction data.

Updating FA 2008 s.114: FA 2008 s.114 refers to HMRC’s ability to “obtain access to, and inspect and check the operation of, any computer and any associated apparatus or material which is or has been used in connection with a relevant document”. This provision seeks to grant HMRC the same access to records held on computer, or in any other modern form, as was possible with hard-copy records. However, HMRC now recognises that this narrow definition does not reflect the more transient and fluid nature of modern information and data flows, and prevents HMRC from obtaining software information from third parties and intermediaries. The changes will update s.114 so that it works effectively in a modern, digital tax system. It reflects the way tax information is now created, stored and processed using software, automated systems and cloud-based services. The changes will enable HMRC, where it already has the legal right to request information, to obtain and understand that relevant information which is held within digital systems. The s.114 reforms aim to ensure HMRC can access, check and inspect digital tax records, including those managed by third parties.

HMRC notes that these (and other) changes will be subject to proportionate safeguards to protect the rights of taxpayers and third parties, whilst balancing this with HMRC’s needs to access information to support compliance activities. Affected businesses will need to give careful thought as to how their existing systems and processes will need to be updated to reflect HMRC’s new powers.

Comment

The proposals for reform contained in HMRC’s draft Finance Bill 2026/2027 publication follow on from several years of engagement with industry and will be broadly welcomed. The changes should help to reduce administration and better reflect the economic substance of cryptoasset transactions.

The draft legislation and supporting documents are open for consultation until 7 September 2026 and, in the case of the cryptoasset and stablecoin changes, responses should be sent to digitalassets@hmrc.gov.uk.