# Crypto lending and borrowing — UK tax guide

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.

## Key facts
- CeFi interest (BlockFi-style successors, exchange earn products): usually Income Tax.
- DeFi yield farming: often Income Tax on rewards; CGT when you later sell reward tokens.
- Wrapping/unwrapping tokens may count as a disposal — check each case.
- Liquidation sells collateral — CGT calculation on forced disposal.
- Loan origination fees in crypto: part of cost base or deductible depending on use.
- Record smart contract addresses and block timestamps for DeFi.

## 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.
## 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](https://digital-assets.co.uk/tax/stablecoin-tax-uk/).
## 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](https://digital-assets.co.uk/tax/crypto-missing-cost-basis/) 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.

[Read the proposal status and primary sources](https://digital-assets.co.uk/tax/crypto-tax-reform-2027/)

[Liquidity pool and impermanent-loss records](https://digital-assets.co.uk/tax/liquidity-pools-impermanent-loss-tax/)

[Liquid staking and restaking evidence](https://digital-assets.co.uk/tax/liquid-staking-restaking-tax/)

[Wrapped and bridged tokens](https://digital-assets.co.uk/tax/wrapped-bridged-crypto-tax/)

## Visual explanation
One DeFi position, separate events
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?
Keep each stage separate. A platform’s labels do not decide beneficial ownership or whether a return is income or capital.

## FAQs
### 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.

## Sources

- [HMRC — Cryptoassets Manual (DeFi)](https://www.gov.uk/hmrc-internal-manuals/cryptoassets-manual)
- [HMRC — Cryptoassets Manual (staking)](https://www.gov.uk/hmrc-internal-manuals/cryptoassets-manual/crypto21000)

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— Digital Assets UK (https://digital-assets.co.uk/tax/crypto-lending-borrowing-uk/), reviewed 2026-09-30. Source: https://www.gov.uk/hmrc-internal-manuals/cryptoassets-manual