Crypto lending and borrowing — UK tax guide
Quick answer: Interest or yield paid in crypto is usually Income Tax when received (sterling value at receipt). Depositing crypto for lending is generally not a disposal if you retain ownership risk — but wrapping tokens (e.g. stETH) may be a swap. Liquidation of collateral is a disposal. Borrowing fiat against crypto is not taxable if you repay — but watch rehypothecation terms.
Lending crypto on CeFi platforms or DeFi protocols, borrowing against holdings, or receiving yield on stablecoins can trigger Income Tax, CGT or both. This guide explains the UK treatment in plain English.
CeFi lending platforms
When you lend bitcoin on a centralised platform and receive periodic interest in crypto or stablecoins, HMRC typically treats receipts as miscellaneous or savings income (Income Tax). The platform may withhold nothing — you declare via Self Assessment. When you withdraw lent assets, returning principal is not a gain.
One DeFi position, separate events
Follow the rights, quantities and GBP values
Keep each stage separate. A platform’s labels do not decide beneficial ownership or whether a return is income or capital.
Read the diagram as text
- 01. Deposit. What asset or ownership leaves your wallet?
- 02. Receipt. What token or right do you receive?
- 03. Return. What is paid, and what is its character?
- 04. Exit. What rights end and which assets come back?
Source: HMRC: nature of a DeFi return
DeFi lending and liquidity pools
Supplying tokens to Aave, Compound or Uniswap pools may involve LP tokens representing your share. Entering a pool can be a disposal of the deposited tokens and acquisition of LP tokens at market value. Rewards (governance tokens, fees) are usually Income Tax at receipt. Exiting the pool disposes of LP tokens.
Stablecoin yield
Earn products paying 4–8% on USDC/USDT are not 'bank interest' for PSA purposes in most cases — treat as crypto income. Sterling value at each receipt date is the taxable amount.
Separate a return from currency movements using the stablecoin sterling-valuation guide.
Borrowing against crypto
Taking a stablecoin loan against bitcoin collateral is not income when you borrow. If collateral is sold because you breach LTV, that sale is a CGT disposal. Repaying the loan and reclaiming collateral is not taxable.
Record-keeping for lending
Export platform statements, on-chain transaction lists, and reward distribution history. Tag transactions in tax software as income vs disposal.
If platform and wallet totals disagree, reconcile missing or duplicated history before accepting a report.
Current law and the proposed April 2027 reform
HMRC published draft measures for cryptoasset loans and liquidity pools in July 2026 with an intended operative date of 6 April 2027. Keep earlier-year calculations under the rules applicable at the transaction date. A future no-gain/no-loss proposal is not permission to erase an existing disposal.
Frequently asked questions
Is staking the same as lending for tax? +
Similar Income Tax treatment on rewards. Staking may also involve disposal when delegating — see our staking tax guide.
Can I offset loan interest against crypto gains? +
Personal borrowing interest is generally not deductible against CGT. Business borrowing differs — seek accountant advice.