Draft legislation – not yet law. Position reviewed 30 July 2026.
The UK government has announced changes to the tax treatment of stablecoins.
HMRC published a policy paper and draft Finance Bill 2026-27 legislation on 13 July 2026. The measure aims to treat eligible stablecoins more like money for tax purposes.
For individuals and trustees, disposals of eligible stablecoins will become exempt from Capital Gains Tax if the draft rules are enacted. Certain qualifying returns from eligible stablecoins will also be treated as interest for Income Tax purposes.
The measure is intended to take effect from 6 April 2027 for individuals and trustees.
The legislation remains in draft and must go through the legislative process. However, the government has announced the measure and published detailed draft rules with an intended start date of 6 April 2027.
For individuals who regularly use stablecoins to buy and sell other cryptoassets, the proposed Capital Gains Tax exemption could significantly simplify their tax calculations.
How are stablecoins taxed now?
Stablecoins are currently generally treated in the same way as other cryptoassets for UK tax purposes.
HMRC says there are no specific tax rules for stablecoins and existing tax legislation does not specifically define the term “stablecoin”. The tax treatment depends on the circumstances in which the stablecoin is used and its particular features.
Although stablecoins aim to maintain a stable value, gains and losses can still arise.
HMRC highlights foreign exchange movements as one example for stablecoins linked to a currency other than sterling. A US dollar stablecoin may remain close to one US dollar, but its sterling value can change as exchange rates move.
A stablecoin can also temporarily or permanently move away from its intended value.
For individuals, stablecoins will typically be chargeable assets for Capital Gains Tax purposes under the current rules.
This means that using stablecoins can create a disposal.
For example, an individual may sell Bitcoin for a stablecoin and later use the stablecoin to buy Ethereum.
The disposal of Bitcoin needs to be considered for Capital Gains Tax purposes. Under the current rules, the later disposal of the stablecoin also needs to be considered.
Even where the stablecoin produces a negligible gain or loss, the individual may still need to track its acquisition and disposal.
HMRC specifically highlighted this administrative burden in its March 2026 call for evidence.
Why are the stablecoin tax rules changing?
Stablecoins have increasingly developed a different economic purpose from many other cryptoassets.
HMRC notes that stablecoins have mainly been used to buy and sell more volatile cryptoassets and within decentralised finance. However, the government expects stablecoins to become increasingly important in traditional finance and future payment systems.
HMRC also recognised that the current Capital Gains Tax treatment can create administrative burdens that do not arise when someone uses fiat currency.
Under the current rules, using a stablecoin to buy goods or services will typically create a Capital Gains Tax disposal. The individual may therefore need to record the acquisition and disposal simply because they used a stablecoin as a means of payment.
The government considered several options during its March 2026 call for evidence. One option was to exempt certain stablecoins from Capital Gains Tax.
The government has now announced an exemption for eligible stablecoins. HMRC says the measure aims to clarify and simplify their taxation and better reflect the commercial and economic reality of how they are used.
What will change from 6 April 2027?
For individuals and trustees, the draft rules make two significant changes:
- Disposals of eligible stablecoins will be exempt from Capital Gains Tax.
- Certain qualifying returns from eligible stablecoins will be treated as interest.
The changes are intended to apply from 6 April 2027.
The exemption will not apply to every cryptoasset described as a stablecoin. The cryptoasset must meet the definition of an eligible stablecoin in the legislation.
Eligible stablecoins will be exempt from Capital Gains Tax
The biggest change for individuals is the proposed Capital Gains Tax exemption.
The draft legislation provides that a gain is not a chargeable gain where it arises on the disposal by a person other than a company of an eligible stablecoin, or an interest in an eligible stablecoin, subject to the detailed conditions in the legislation.
This is different from the no gain, no loss treatment proposed for certain cryptoasset lending and liquidity pool transactions.
Under no gain, no loss treatment, the tax history generally carries forward and a gain or loss can arise later.
The stablecoin measure instead provides an exemption for relevant gains on eligible stablecoins.
For an individual using eligible stablecoins between cryptoasset transactions, this could remove a significant amount of Capital Gains Tax administration.
A common stablecoin transaction
HMRC says stablecoins have predominantly been used for buying into and selling out of more volatile cryptoassets.
Consider an individual who sells Bitcoin for a stablecoin and later uses the stablecoin to acquire Ethereum.
Under the current rules:
- Bitcoin to stablecoin creates a disposal of Bitcoin.
- Stablecoin to Ethereum creates a disposal of the stablecoin.
- The individual must consider the Capital Gains Tax position for both assets.
If the draft rules take effect from 6 April 2027 and the stablecoin meets the definition of an eligible stablecoin:
- Bitcoin to eligible stablecoin will still create a disposal of Bitcoin.
- A gain arising on the disposal of the eligible stablecoin when acquiring Ethereum will not be a chargeable gain.
- The acquisition of Ethereum will still form part of the individual’s Capital Gains Tax records.
The exemption therefore does not make the wider crypto transaction tax free. It removes the chargeable gain that would otherwise arise on the disposal of the eligible stablecoin.
The exemption also means that a fall in value after an asset enters the exempt regime would not normally produce an allowable Capital Gains Tax loss.
What is an eligible stablecoin?
The word “eligible” is important.
Under the draft Capital Gains Tax rules, eligibility is tested by reference to the day the asset was acquired. Where it was acquired before the new regime begins, 6 April 2027 is used for this purpose.
The new exemption will not automatically apply to every token marketed or described as a stablecoin.
Broadly, under the draft legislation, a cryptoasset can qualify as an eligible stablecoin where currency or other assets are held to support its stable value in relation to sterling or another currency.
The cryptoasset must also be designed for use as a means of payment or settlement.
In addition, cryptoassets of that type must be widely available.
The widely available condition requires the cryptoassets to be available to a substantial number of independent and unconnected persons. It must also be reasonable to assume that they are, or will be, traded with enough frequency and volume to constitute an active market.
The supporting assets cannot consist of cryptoassets of the same type as the stablecoin itself.
These conditions mean that the tax treatment depends on the characteristics of the stablecoin rather than simply its name or description.
HMRC used USDT and USDC as examples of popular stablecoins in its March 2026 call for evidence. However, the July draft legislation does not provide a list of stablecoins that HMRC has confirmed as eligible under the new tax rules.
It would therefore be premature to assume that every commonly used stablecoin automatically qualifies for the Capital Gains Tax exemption.
What about US dollar stablecoins and exchange rate gains?
The draft definition can cover a stablecoin that maintains a stable value in relation to sterling or another currency.
The exemption is therefore not limited to sterling-linked stablecoins.
This is particularly important for US dollar stablecoins.
HMRC highlighted in its call for evidence that foreign currency movements can create gains and losses on non-sterling stablecoins under the current rules.
A stablecoin may remain worth one US dollar throughout the period an individual holds it. However, its value in pounds can change because the sterling to US dollar exchange rate has moved.
Under the current rules, this can create a Capital Gains Tax gain or loss when the individual disposes of the stablecoin.
If the new rules are enacted as drafted, a gain on the disposal of an eligible stablecoin will not be a chargeable gain.
This could significantly change the Capital Gains Tax position for individuals who regularly use qualifying US dollar-linked stablecoins as part of their cryptoasset activity.
What happens to stablecoins already held on 6 April 2027?
The draft legislation contains an important transitional rule.
Where an individual holds an asset immediately before 6 April 2027 and the new stablecoin exemption would apply to a later disposal, the legislation treats the individual as disposing of the asset immediately before 6 April 2027.
The individual is then treated as immediately reacquiring the asset at market value.
Importantly, the draft legislation treats any resulting gain or loss as accruing on 6 April 2027.
This creates a boundary between the existing Capital Gains Tax treatment and the new exemption.
Historic gains or losses on eligible stablecoins are not simply erased when the new rules start.
For individuals holding significant stablecoin balances at the start of the new regime, the transitional rules could therefore be important.
Qualifying stablecoin returns will be treated as interest
The second major change affects certain returns from eligible stablecoins.
HMRC explains that because stablecoins are not generally considered money under the current treatment, returns generated from lending stablecoins are not generally treated as interest.
For individuals, HMRC says these returns would generally fall within miscellaneous income rather than savings and investment income. HMRC highlighted in its call for evidence that this can affect which tax allowance may be relevant.
From 6 April 2027, the draft legislation will treat qualifying stablecoin returns as interest for Income Tax purposes.
The new rules cover qualifying returns arising under a cryptoasset debt or a qualifying single cryptoasset lending arrangement.
For a return arising under a cryptoasset debt, it must be reasonable to assume that the return relates to the time value of the cryptoassets. The cryptoassets must also be eligible stablecoins when the return accrues.
For a single cryptoasset lending arrangement, the invested cryptoassets must be eligible stablecoins when the return accrues.
Where the statutory conditions are met, the return will be treated as interest.
This means the return will fall within the savings income rules rather than the miscellaneous income rules.
The Personal Savings Allowance may therefore become relevant, depending on the individual’s wider tax position.
Does this make all stablecoin income savings income?
No.
The legislation targets qualifying stablecoin returns.
The detailed conditions still matter. A payment does not become interest simply because an individual received it in connection with a stablecoin.
The nature of the arrangement and the return must meet the conditions in the legislation.
Individuals will still need to identify how they generated a return before deciding how to report it.
What about companies?
Different rules are intended to apply to companies from 1 April 2027.
Broadly, the measure will bring eligible stablecoins and certain transactions involving their lending within the Corporation Tax loan relationship rules.
HMRC says the tax treatment will generally follow amounts recognised in the company’s accounts.
This article focuses on individuals. Companies holding, issuing or lending stablecoins should consider the separate Corporation Tax rules.
Are the new stablecoin tax rules retrospective?
The Capital Gains Tax exemption is intended to apply to disposals made on or after 6 April 2027.
The new Income Tax treatment is intended to apply to qualifying returns arising on or after 6 April 2027.
The draft rules do not simply rewrite the treatment of stablecoin transactions in earlier tax years.
Historic disposals still need to be considered under the tax rules that applied at the time.
However, the transitional Capital Gains Tax rule for stablecoins already held immediately before 6 April 2027 is important. The deemed disposal and reacquisition provisions create a boundary between the existing treatment and the new exemption.
Anyone with a significant stablecoin holding at the start of the proposed new regime may therefore need to review their position carefully.
Are the new stablecoin tax rules final?
No. The legislation remains in draft.
The government announced the measure on 13 July 2026 and HMRC states that it will have effect from 6 April 2027 for individuals and trustees.
HMRC published the draft clauses as part of the Finance Bill 2026-27 draft legislation and technical tax documents. The draft legislation must still go through the legislative process.
It would therefore be wrong to say that the law has already changed.
The current position is that the government has announced the measure, published draft legislation and set an intended operative date of 6 April 2027.
Final thoughts
If enacted as drafted, the stablecoin tax changes could significantly simplify Capital Gains Tax reporting for individuals who regularly use stablecoins to move between cryptoassets.
The exemption for eligible stablecoins should remove relevant stablecoin gains from Capital Gains Tax. The treatment of qualifying stablecoin returns as interest should also bring those returns within the savings income rules.
However, the word “eligible” matters. The draft legislation sets specific conditions, and HMRC has not published a definitive list of stablecoins that qualify. It would be wrong to assume that every token described as a stablecoin will automatically become exempt from Capital Gains Tax.
The transitional rules also matter. Existing holdings are not simply moved into the proposed exemption with historic gains and losses ignored.
Most importantly, the legislation remains in draft. The government has announced the measure and published detailed legislation, but the law has not yet changed. The final position should be checked as the Finance Bill progresses and HMRC publishes further guidance.
If you have used stablecoins and are unsure how your transactions should be reported, get in contact or speak to a tax adviser who understands cryptoassets and the UK tax rules.
This article is for general information only and is not personal tax advice. Tax treatment depends on the facts and the law in force. See the website disclaimer.
