UK Draft Tax Rules Propose CGT Exemption for Stablecoins

The UK government has set out proposed tax changes covering stablecoins and decentralised finance (DeFi) activities, introducing dedicated rules targeted for implementation from 6 April 2027.

Draft Rules for Stablecoin Transactions

Under draft legislation published by the government, eligible stablecoins designed to track traditional currencies like sterling or US dollars will receive separate tax treatment. According to analysis by Saffery, the proposals aim to treat eligible stablecoins more like money for UK tax purposes.

For individual investors, disposals of eligible stablecoins would be exempt from Capital Gains Tax (CGT). However, interest-like returns earned from holding or staking stablecoins would be taxed as savings income under the proposed framework.

Capital Gains Treatment for DeFi Activities

The draft legislation also outlines specific CGT treatment across three distinct types of decentralised finance arrangements:

• Single Asset Lending: Lending a token and receiving an equivalent token back after a set period is treated on a ‘no gain no loss’ basis, deferring gains until an economic disposal occurs.
• Single Asset Borrowing: Providing collateral for borrowing is disregarded for CGT purposes. If borrowed tokens are sold, replacement tokens acquired later to repay the loan are matched against the originals.
• Automated Market Making: Exchanging tokens for liquidity pool rights is treated as a ‘no gain no loss’ disposal. The final tax position depends on whether more, fewer, or equal tokens are returned when exiting the pool.

What UK Investors Should Keep in Mind

Because these provisions remain draft legislation, taxpayers cannot currently rely on these proposed treatments for current tax returns. Existing Capital Gains Tax pooling rules continue to apply to current disposals. Readers can also review our UK Crypto Tax Guide for 2026/27 for current rules and allowances. This article is for educational information only and does not constitute financial or legal advice.

Main picture: Photo by Mohamed Marey on Unsplash