# 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.
## 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.

## 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 2026-06-23. Source: https://www.gov.uk/hmrc-internal-manuals/cryptoassets-manual