DeFi yield is rarely tax-free, and the rules differ meaningfully between the US and UK. Lending interest, liquidity-provision fees, and farming or staking rewards are generally treated as ordinary income, taxable at their fair market value when received. This estimator sums your reward income by source, applies your marginal band, and shows the resulting income tax — plus an illustration of how token price movement between receipt and later disposal changes the numbers.
How UK and US treatment compares
Both jurisdictions agree on the core principle — rewards are income at receipt — but differ in some details:
| United Kingdom | United States | |
|---|---|---|
| Lending interest | Income (miscellaneous income) | Income (ordinary rates) |
| Liquidity provision fees | Income when received (HMRC guidance) | Income when received (IRS Notice 2014-21 by analogy) |
| Farming/staking rewards | Income at receipt (HMRC 2022 guidance) | Income at receipt (IRS Revenue Ruling 2023-14) |
| Later disposal of reward tokens | Separate capital gains event (CGT) | Separate capital gains event (short or long term) |
| Basis for income calculation | GBP value at date of receipt | USD value at date of receipt |
The IRS addressed staking rewards specifically in Revenue Ruling 2023-14, confirming they are gross income in the year received. HMRC’s position on DeFi lending and staking was clarified in its 2022 crypto assets guidance.
How it works
The tool applies a flat marginal rate to the total reward income across all three sources:
total income = lending interest + liquidity fees + farming/staking rewards
income tax = total income × marginal rateIt also shows a side-by-side illustration: if those same reward tokens were instead valued at the time of later disposal. This is not a second tax event on the income — the income event happens at receipt. The illustration shows how the income figure would have looked at a different valuation point, which is useful for understanding the impact of token price volatility on your reported income.
Worked example
A UK higher-rate taxpayer (40%) with:
- Lending interest: $1,200 USD equivalent
- Liquidity provision fees: $800
- Farming rewards: $2,000
Total reward income = $4,000 → Income tax at receipt = $1,600
If those same tokens had fallen to $3,000 in value by the time they were disposed of, the disposal would be a separate capital loss of $1,000 (value at disposal minus value at receipt used as cost basis). The income tax at receipt is still $1,600 — you cannot retroactively reduce it based on a later price fall.
What this calculator does not model
- Progressive tax brackets or tapering personal allowances
- The UK Personal Savings Allowance or the £1,000 Trading Allowance
- The US standard deduction or personal exemptions
- National Insurance contributions (UK) or FICA/self-employment tax (US)
- Capital gains tax on later disposal of the reward tokens
- Impermanent loss adjustments, which remain a grey area in both jurisdictions
Record the GBP or USD value of each reward at the precise moment of receipt — the figure your tax authority requires is the fair market value at that specific time, not a weekly or monthly average. This tool provides a simplified planning estimate; confirm your actual liability with official HMRC guidance, IRS publications, or a qualified crypto tax adviser.