UK Crypto Tax

[rainbowhunter 1,424]

A couple of points on UK tax.

Dont forget that CGT dies with you!

Depending upon the size of your stash the biggest threat to your family is UK Inheritance tax

[No1butsum1 87]

If your wealth is of significance don't people create a trust to avoid inheritance taxes? (I am not an expert on this, maybe someone can add?).

[Westy 276]

51 minutes ago, XRPHornets said:

If, in the future,  you do have a large enough sum of XRP that you can live off, the best way to proceed is to take your capital gains as income, use your 9k capital gains tax free threshold, and then declare the rest as capital gains at 20% .

 

For example, you take 100k per annum as income.

•11.7 k as personal income at 0% tax

• 11.3k as CGT tax free allowance

• 77k as CGT at 20%

I dont think thats possible as its a completely different tax all together and cannot be split between the two allowances. It would be taxed as :

 

tax year 2018-2019: 

11,700 income at 0% 

34,650 income at 10% = 3,465

53,650 income at 20% = 10,730

total tax bill = £14,195 

 

just verified using the capital gains calculator on the .gov website with the assumption of no loses and no purchase price declared as well as no other earnings and it shows you would owe £14,210..... i was close enough. 

 

either way both your worked out tax bill and my one are not far off each other 

Edited April 17, 2018 by Westy

[rainbowhunter 1,424]

2 minutes ago, No1butsum1 said:

If your wealth is of significance don't people create a trust to avoid inheritance taxes? (I am not an expert on this, maybe someone can add?).

If you create a trust with a value in excess of the Nil Rate Band (currently £325k) then anything in excess is subject to an immediate 20% tax charge. Lots of ways to manage IHT, not least gifting, outright gifts are unlimited and not subject to IHT if you survive 7 years

[Mrsrippley 398]

I know someone who called the HRMC regarding their tax requirements and they were told that each individual case would be heard individually. As they only invested a relatively small amount and they held down a full time job then they were not required to pay CG as it was considered winnings. Now if you trade, have different assets etc you would prpbably fall under the blanket to pay CG. At the moment every case is different and HRMC have suggested that it is best to contact them directly. This may all change in the coming years, however, as regulations in the sector grow and mature, then so will the tax bills! I myself will be happy to have a very large tax bill by EOY or maybe I should move to Gibraltar for real.

[Hairy_Trousers 4]

2 hours ago, Flintstone said:

I looked in to the above and checked it against the .gov website and it seems correct.

Isle of man etc. You have to be a resident for 5 years I think, before getting the cgt benefits.

Re the Isle of Man. I think if you return to live in the UK within 5 years, you will be liable for the CGT,  if you don't its all yours!! Also there is no inheritance tax, no stamp duty, no corporation tax. And you can still come back and spend 90 days every year in the UK. I've decided to move to the Isle of Man, not just for the tax benefits but also for the quality of life.

Also to be classed as a resident of the Isle of Man, you only have to spend 3 months of the year on the island, lots of the wealthy people spend the winters abroad!

[NorthLane 256]

 

https://www.gov.uk/government/publications/revenue-and-customs-brief-9-2014-bitcoin-and-other-cryptocurrencies

This, to my knowledge, is the “latest” official guidance from HMRC on cryptocurrencies. For the moment the government are still of the opinion that existing laws/regulation can be applied.

I for one have included a 20% CGT provision in all of my “Jesus, if XRP gets to $X then i’ll walk away with £Y” scenarios (don’t laugh, you all do it too ?). However I have NOT included any trading activity, selling high and buying low, as my losses were greater Than my gains he four times I tried to do it, plus I’m not sure we’ll get there here in the U.K. (and how is that even possible without the exchanges all handing over data).

I fully expect to pay any and all taxes when I do cashout.

[Geospectrum 326]

3 hours ago, XRPHornets said:

If, in the future,  you do have a large enough sum of XRP that you can live off, the best way to proceed is to take your capital gains as income, use your 9k capital gains tax free threshold, and then declare the rest as capital gains at 20% .

 

For example, you take 100k per annum as income.

•11.7 k as personal income at 0% tax

• 11.3k as CGT tax free allowance

• 77k as CGT at 20%

 

....which means on 100k annual earnings you ll pay 15.4k in tax. (ie 0.2 x 77k)

 

This means you can have a very tidy income of 100k per annum paying only approx 15%, whilst the remaining XRP continue to generate capital wealth.

Im told you can register in Isle of Mann etc but not sure how I feel about the morality of that. Only paying 15% tax on a decent income is fine by me.

Assuming you have no other income to eat up your allowances.

[Mikhail_Liebenstein 533]

On 17/04/2018 at 5:59 PM, CT99 said:

Good evening from Edinburgh. I think at the moment it's 20% capital gains tax. I also heard the gambling gains suggestion but don't think that is the case (sadly)

I agree with the CGT rules assessment, I.e upto the CGT allowance at 0% (other gains include) and then 20%.

I may have been into that around the ATH, but since then price have rowed back.

The main complexity I think is when people trade full time, as at that point gains can be treated as income. I think the test for that is essentially that you aren’t in any other work and spend all day trading.

The only question I have is what happens when trading between Cryptos. Right now I don’t think that creates a tax event in the UK, though in the US views differ. What might be worth more discussion is you sell out into fiat temporarily, i think that doesn’t count if you buy back the same asset (look up Bed and Breakfasting as it used to be called)  versus trading into say US Dollars or  US Dollat Tether.

 

[Mikhail_Liebenstein 533]

On 17/04/2018 at 8:42 PM, Mrsrippley said:

I know someone who called the HRMC regarding their tax requirements and they were told that each individual case would be heard individually. As they only invested a relatively small amount and they held down a full time job then they were not required to pay CG as it was considered winnings. Now if you trade, have different assets etc you would prpbably fall under the blanket to pay CG. At the moment every case is different and HRMC have suggested that it is best to contact them directly. This may all change in the coming years, however, as regulations in the sector grow and mature, then so will the tax bills! I myself will be happy to have a very large tax bill by EOY or maybe I should move to Gibraltar for real.

I think this is good advice. As I said below, the regime for Traders differs from normal CGT.

If you aren’t working at trading full time and have a main job that is different, then CGT rules apply, so essentially £10,700 tax free this year and then 20% over that. 

The only other difference may be where it is treated as gambling. I suspect eToro counts as gambling, whereas most exchanges count as holding an asset. 

Edited April 18, 2018 by Mikhail_Liebenstein

[Westy 276]

On 4/18/2018 at 9:47 PM, Mikhail_Liebenstein said:

suspect eToro counts as gambling,

nope you hold the asset on etoro so still counts as CGT 

[Mikhail_Liebenstein 533]

44 minutes ago, Westy said:

nope you hold the asset on etoro so still counts as CGT 

But you can’t send them? And they do offer shorting. Are they CFD like?

[GoonerAdy 56]

On 4/17/2018 at 6:21 PM, Flintstone said:

I’ve had this saved in a tab for a while now. This is a quote from here: https://bitcointalk.org/index.php?topic=2598830.0

 

This is my understanding of it.

When selling your bitcoins in the UK you pay capital gains tax on the profit.  If you're a basic rate tax payer (i.e. you earn less than £45,000 per year), then you pay 10% CGT.

Example: 

You buy 10 Bitcoins for £5 each many years ago. 

You then sell 3 of these Bitcoins for £45,000.

You then deduct the cost of the Bitcoins £45,000 - £15 = £44985

You're allowed £11,300 tax free, so 44985 - £11,300 = £33685

You pay 10% tax on £33685 = £3368.50 tax.

Theoretically, if you had a partner who you trust and also is a basic rate tax payer, then they could also sell the above amount and pay 10% CGT.

In total you could sell around £90,000 per year between you both and pay 10% tax.  If you're patient enough do this every year, rather than selling all at once.

I'm happy to be corrected if anyone now differently.

This is bang on @Flintstone, that is until a future government realise how much tax they can sting us for and makes some special ruling on crypto profits!

I hope that with regulation and institutional money coming in, that crypto gets treated more like shares in terms of taxation since the big money companies will lobby hard to not pay taxes as always! 

[SCHUMIXRP 2,126]

On 4/17/2018 at 7:00 PM, Westy said:

I dont think thats possible as its a completely different tax all together and cannot be split between the two allowances. It would be taxed as :

 

tax year 2018-2019: 

11,700 income at 0% 

34,650 income at 10% = 3,465

53,650 income at 20% = 10,730

total tax bill = £14,195 

 

just verified using the capital gains calculator on the .gov website with the assumption of no loses and no purchase price declared as well as no other earnings and it shows you would owe £14,210..... i was close enough. 

 

either way both your worked out tax bill and my one are not far off each other 

Yep that was pretty darn close, well done sir. And absolutley fine by me. Iv factored in paying 20% on everything so any less within certain brackets is a bonus. 

I see read in many areas of this space people talking of trying to avoid this altogether, i cannot stress enough how bad a move that would be. Ofcoarse we would all prefer not to pay tax but its just the way it is. Pay it and enjoy your earnings with peace of mind. 

[SCHUMIXRP 2,126]

Another point id like to add when it comes to tax planning this. A couple of smart people have posted how you can make best of your annual tax alouances and lower tax thresholds (if any) by only selling so much per year. Thats all good and well if the investments value dosent drop out of the sky and leave you with less than you would have if you'd just sold and payed the tax. Ofcoarse its difficult as we dont have a crystal ball but if you have a target and you can hit it even after paying full tax then personally id take it. Ideally with some xrp still in play for more gains but dont let greed bite you in the a***.

Edited April 30, 2018 by Gourlay
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