How to prepare for cashing out crypto in the United Kingdom? (Beginner questions)

[RBraun]

(Beginner questions)

Is my understanding correct in how I should approach this?

1. I should register a business (corporation with myself as director?) and find someone who'll buy my crypto OTC and invoice me for services I provided.
2. This business should have its own bank account. I can pay myself a salary from this account.
3. I should then pay tax. Capital gains tax, or income tax? I am actually willing to pay tax to make this more expedient.

Please give your suggestions, thanks for reading.

 

[LondonOTC]

If you can prove the source of funds and happy to pay your capital gains, the easiest way is to cash the Crypto from Coinbase.

If not, then go for 1 , 2 ,3 and you pay corporate tax.

Let me know if you need help with the OTC deals

 

[khinkali]

I'm going to guess from other posts that you're a resident of the UK and have a British passport, you have holdings worth EUR 1m+ and you want to spend some of your crypto on home improvements etc. Now you want to cash out £50-£100k without making an enemy of the banks or HMRC. You have not traded with your main holdings which you've had since 2015.

If the original source of funds was clean and you're willing to pay some tax then a well respected local tax accountant can help you with the Self Assessment form and answer any enquiries from HMRC or your bank if needed. A well established accountant asks you all the awkward questions up front, so later if there are difficult questions they should be able to answer with confidence. If your accountant has been practicing for a long time in a boring and safe way, their replies to authorities should be treated without too much suspicion.

You'll be due some capital gains tax on the profits on the crypto that you sell. So if you bought X crypto for £10k and now it's worth £1000k and you want to sell £50k then you pay CGT on £50k*(*1000k-50k)/1000k)=£47k5. This is a maximum of £7,540 even if you declare lots of taxable income and used up your allowances already. Well under 1% of your wealth goes to taxes, to keep things above board. Of course you need a crypto friendly bank account, some intermediary or an OTC dealer as not all UK banks like getting unexpected £100k payments from crypto exchanges.

A business paying you salary will probably cost more in taxes, fees and hassle.

If the original source of funds was dodgy then it probably is easier to relocate - else spend a lot of nights lying awake and hoping that tomorrow isn't they day you get caught running some complex scheme.

Also if you want to cash in tax free then you can relocate. You didn't cause taxable events in the last few years and the UK doesn't have exit taxes (apart from some immovable property) or citizen taxes...yet. UAE or maybe Georgia, Portugal or Germany. I suspect you know the list already.

 

[CaptK]

(Beginner questions)

Is my understanding correct in how I should approach this?

1. I should register a business (corporation with myself as director?) and find someone who'll buy my crypto OTC and invoice me for services I provided.
2. This business should have its own bank account. I can pay myself a salary from this account.
3. I should then pay tax. Capital gains tax, or income tax? I am actually willing to pay tax to make this more expedient.

Please give your suggestions, thanks for reading.

Moving the funds to a company will cause a tax event @50% you could do it via an LLP then you are using it as a capital contribution.
Bank account will not be a problem as you will be invoicing for the payment.
Pay yourself either salary or dividends or a combination.
Income tax will then be liable and not CGT.

Suffer 6 months abroad, cash out and then come back you have options from UAE to the Med or you can have a long holiday in the Caribbean.

 

[Waldo Roni]

"I want to pay taxes! But I don't know how to, properly! Help me pay taxes. I have crypto, which is decentralized money, which the government doesn't know about, nor would it find out, but I still want to pay taxes for it!"

I don't fathom why some people overcomplicate their lives. Companies, taxes, exit strategies... If it was money in an offshore bank... But it's crypto.


Why merely not use decentralized exchanges and P2P?

 

[RBraun]

"I want to pay taxes! But I don't know how to, properly! Help me pay taxes. I have crypto, which is decentralized money, which the government doesn't know about, nor would it find out, but I still want to pay taxes for it!"

I don't fathom why some people overcomplicate their lives. Companies, taxes, exit strategies... If it was money in an offshore bank... But it's crypto.


Why merely not use decentralized exchanges and P2P?

I do use decentralised exchances and P2P. However, I've reached my tax-free allowance of £12.5k, and any more gains in my bank this year would be taxable. The problem I'm facing is that my crypto wealth has grown beyond an amount which I could simply cash out and dump into my personal bank account without my bank and tax authorities trying to f**k me.

 

[Waldo Roni]

I do use decentralised exchances and P2P. However, I've reached my tax-free allowance of £12.5k, and any more gains in my bank this year would be taxable. The problem I'm facing is that my crypto wealth has grown beyond an amount which I could simply cash out and dump into my personal bank account without my bank and tax authorities trying to f**k me.

But why any money above that will necessarily be considered taxeble in the first place? When an individual sends you money, it's not taxed. May be it's a gift, or money he ows you.

 

[RBraun]

Moving the funds to a company will cause a tax event @50% you could do it via an LLP then you are using it as a capital contribution.
Bank account will not be a problem as you will be invoicing for the payment.
Pay yourself either salary or dividends or a combination.
Income tax will then be liable and not CGT.

Suffer 6 months abroad, cash out and then come back you have options from UAE to the Med or you can have a long holiday in the Caribbean.

Thanks. I think I will travel to the UAE to cash out. But in the mean time I'm looking for a strategy which will allow me to cash out partially while remaining in the UK. I will likely not be able to provide POSOF.

 

[CaptK]

"I want to pay taxes! But I don't know how to, properly! Help me pay taxes. I have crypto, which is decentralized money, which the government doesn't know about, nor would it find out, but I still want to pay taxes for it!"

I don't fathom why some people overcomplicate their lives. Companies, taxes, exit strategies... If it was money in an offshore bank... But it's crypto.


Why merely not use decentralized exchanges and P2P?

Purely to optimise tax, on the P2P solution it's there but how would you explain that to the bank.
The tax man is never the problem they just want their money. Banks are more cautious these days with regards to deposits. Jurisdiction like the UAE if it's done right the bank don't ask too many questions.

 

[CaptK]

Thanks. I think I will travel to the UAE to cash out. But in the mean time I'm looking for a strategy which will allow me to cash out partially while remaining in the UK. I will likely not be able to provide POSOF.

There are plenty of P2P buyers you can meet in person and conclude the transaction face to face.

Happy to help if you are in the UK

 

[Waldo Roni]

Purely to optimise tax, on the P2P solution it's there but how would you explain that to the bank.

Unless the amount is big, will a bank require explanation?

 

[RBraun]

There are plenty of P2P buyers you can meet in person and conclude the transaction face to face.

Happy to help if you are in the UK

Thanks, I may be in contact eventually to discuss this. But I am still wondering how I would receive the funds, given that I only have a personal bank account and have never filed my own taxes before.

 

[CaptK]

Unless the amount is big, will a bank require explanation?

It depends on the amount but so long the structure is right then you should be ok.

 

[RBraun]

It depends on the amount but so long the structure is right then you should be ok.

Thanks for your reply.

If anyone has ideas about the 'structure' I should choose that would be very much appreciated.

 

[CaptK]

If you are in the UK then cash out about 30K and put that down as a private loan.
Just make sure the company or individual can stack up to lend you that amount.

Happy to discuss options in more detail.

 

[NicolasMaduro]

But why any money above that will necessarily be considered taxeble in the first place? When an individual sends you money, it's not taxed. May be it's a gift, or money he ows you.

"Maybe its a gift or money he owes you".

Obviously this doesn't work. If the tax office were to ever question you about this you would have to prove the original transaction with a loan letter. Also you are saying gifts are tax free? The topic is about the UK so you are claiming that gifts are tax free now hmmm

 

[khinkali]

@NicolasMaduro gifts are generally tax free in the UK if the giver survives 7 years after the gift, else inheritance tax is imposed.

HMRC won't accept tax free gifts to an employee, business associate, supplier, social media influencer etc. and I don't think a gift will magically allow for a non taxable crypto disposal.

 

[babaorum]

You can't avoid capital gains tax if you move abroad for less than 5 years. UK and many other countries have temporary non-residence rules. You'll have to pay the taxes when you come back. Tax if you return to the UK

 

[khinkali]

@babaorum capital gains of UK temporary non residents can be tax free, if the asset was bought and sold while non resident and not remitted to UK. I agree that in OP's case, "cashing out" a UK asset during non residence of under 5 years is taxable.

 

[DavidS]

Why merely not use decentralized exchanges and P2P?

How do you cash out GBP, USD, EUR in a "decentralized exchange"?