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UK Crypto Lending and DeFi Tax: A Practical Guide
Understand UK crypto lending and DeFi tax, including beneficial ownership, receipt tokens, returns, disposals, collateral and the records ASIC miners should keep.
Crypto lending does not have one universal tax result. The contract can create income, a disposal, a new asset or several linked transactions.
TL;DR
- Crypto lending does not have one universal tax result. The contract can create income, a disposal, a new asset or several linked transactions.
- Keep contemporaneous GBP valuations and evidence for income, acquisitions and disposals.
- Use current HMRC guidance and obtain qualified advice for the facts of your operation.
Start with beneficial ownership
Determine whether the arrangement transfers beneficial ownership or merely places assets under a service. If ownership changes, entering the arrangement can be a disposal even where the user expects the same quantity back.
Returns and rewards
Interest-like or protocol returns can be revenue in nature and taxable as miscellaneous or trading income. Their GBP value and the time they arise must be evidenced.
Receipt and liquidity tokens
Receiving a new token representing a claim or position can indicate an acquisition and may accompany a disposal of the original asset. Redemption is another transaction to analyse.
Collateral and liquidation
Providing collateral is not automatically tax neutral. The rights transferred, control, liquidation event and assets returned matter. Borrowing cash is not itself income, but associated crypto transactions may create tax events.
Keep the contract and transaction trail
Save terms, protocol version, wallet transactions, valuations, fees, rewards, liquidations and redemption records. A dashboard screenshot alone is rarely enough to reconstruct the legal and economic events.
Useful next steps
Authoritative references
Use current official guidance because tax rules and HMRC guidance can change.
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