Quitting day job to trade crypto - need advice as to what path to take from here

[BeardedNomad]

Hi,

I am a UK resident since birth and have started trading in crypto over the last few months. Shortly, this will be my only source of income as I have started the process to finish my day job.

As I understand it, profits from crypto trading will be taxed as Capital Gains Tax, in the region of 10-20% dependant on amount. As I am making a major lifestyle change with quitting my job and that I do not have anything to keep me in the UK, I want to ask for advice/suggestions as to my next step.

Ultimately I want to reduce my tax responsibilities and overall expenditure as much as possible. I am happy to move abroad, setup a company etc to assist with these goals but I do not have the faintest idea of where to begin. I thought best to ask here before I start down the wrong path.

I have no criminal record and nothing to prevent me from moving.

Hopefully this is enough information to get the conversation started.

Many thanks.

 

[3leaf]

congrats bearded nomad on taking the leap. On Youtube you will find great info on answers to your questions - <<snippet>> is a great start as well as Offshore Citizen. Ive been on this journey for awhile now and there is alot to learn. Also been in crypto for awhile and its been a wild ride. Check into CryptoSniper as well, he does day trading and all. Looking forward to hearing your progress.
Best of luck!

 

[CyprusLaw]

Hi,

I am a UK resident since birth and have started trading in crypto over the last few months. Shortly, this will be my only source of income as I have started the process to finish my day job.

As I understand it, profits from crypto trading will be taxed as Capital Gains Tax, in the region of 10-20% dependant on amount. As I am making a major lifestyle change with quitting my job and that I do not have anything to keep me in the UK, I want to ask for advice/suggestions as to my next step.

Ultimately I want to reduce my tax responsibilities and overall expenditure as much as possible. I am happy to move abroad, setup a company etc to assist with these goals but I do not have the faintest idea of where to begin. I thought best to ask here before I start down the wrong path.

I have no criminal record and nothing to prevent me from moving.

Hopefully this is enough information to get the conversation started.

Many thanks.

I am sure you will be considering a number of jurisdictions, I would suggest to consider Cyprus, and to seek professional advice there. I am setting out below some brief info:

Capital Gains Tax (CGT) in Cyprus is imposed at the flat rate of 20% on the following sources of income:

1. Gains from disposal of immovable property located in Cyprus;
2. Gains from disposal of shares of companies which own immovable property situated in the Republic and that are not listed on a recognised stock exchange;
3. Gains from disposal of shares of companies, which indirectly own immovable property located in the Republic and derive a minimum of 50% of their market value from this immovable

Therefore it is clear that cryptocurrencies do not fall under this.

Now the question which is unclear and there are two schools of thought, is whether (i) cryptocurrencies would be taxed as general income and therefore falling under the different income tax bands (if individual) or under the 12.5% corp tax if a company; (ii) or they would be deemed to be 'securities' and be tax exempted.

At the moment this is not clear, there is no tax framework and no tax ruling on the matter, therefore different advisors take different positions. In my view the safest option is to consider such profits as general income, as at the moment there is no framework or ruling providing otherwise; and if at any point the tax authorities rule that the profits from cryptos are tax exempted then any tax paid could be refundable.

 

[tsu458]

I am sure you will be considering a number of jurisdictions, I would suggest to consider Cyprus, and to seek professional advice there. I am setting out below some brief info:

Capital Gains Tax (CGT) in Cyprus is imposed at the flat rate of 20% on the following sources of income:

1. Gains from disposal of immovable property located in Cyprus;
2. Gains from disposal of shares of companies which own immovable property situated in the Republic and that are not listed on a recognised stock exchange;
3. Gains from disposal of shares of companies, which indirectly own immovable property located in the Republic and derive a minimum of 50% of their market value from this immovable

Therefore it is clear that cryptocurrencies do not fall under this.

Now the question which is unclear and there are two schools of thought, is whether (i) cryptocurrencies would be taxed as general income and therefore falling under the different income tax bands (if individual) or under the 12.5% corp tax if a company; (ii) or they would be deemed to be 'securities' and be tax exempted.

At the moment this is not clear, there is no tax framework and no tax ruling on the matter, therefore different advisors take different positions. In my view the safest option is to consider such profits as general income, as at the moment there is no framework or ruling providing otherwise; and if at any point the tax authorities rule that the profits from cryptos are tax exempted then any tax paid could be refundable.

Always the same cyprus advice - what is the reason to pay up to 35% income tax on capital gains in cyprus (because regulation is unclear) while in the UK he would pay 10-20%? More tax, more risk!

 

[glengoolie]

forget cyprus. it's a scam, like portugal's nhr program. it's full of holes like a swiss cheese. cyprus is ok for companies, not individuals.

UAE will be the best bet for you. at least for the first year to save on taxes. you can buy cheap real estate and get a resident visa. after the first year you have tax residency(183 days will do but since you are moving, i'd give it full year so UK will leave you alone). if that won't work because you don't have money to buy property there yet, you could try to do the 3x90 day visit to get the 183 days tax residency that way.

if UAE is not fine with you or not possible, have a look at my planned route for the next year: Cyprus company with Malaysian residence for trading?

as UAE alternative, i do not think there is a better way other than going into literal tax heaven.

also, as UK citizen, make sure you leave nothing behind and check the tax residency requirements of UK because i think UK is one of those countries that can hunt you for a few years after you leave.

ps: get out of crypto as soon as you can. move your money into proper assets to be on the safe side of the law and taxes.
pps: once you move, immediately notify your bank and brokers with your new address. if you keep your UK address, UK can use it as proof of you not leaving and tax you. the sooner you do that the better. but be prepared that they might drop you since they might no like the country into which you move so you might need to set up new bank account(s) and broker account(s).

 

[khinkali]

As I understand it, profits from crypto trading will be taxed as Capital Gains Tax

This might not be the case as you're leaving your day job to focus on trading. The point at which you move from capital gain to business income is not very clear. HMRC use words like "organised activity" vs "hobby", or "doing this as a business or trade" vs "investing".

I suggest either accept the costs and hassle of UK taxation, or move. I think you'll need an accountant to sort out your "split year" tax treatment, assuming you don't want to wait until next April for a fresh tax year.

Assuming you get out of UK, my list is:

Georgia: Companies are taxable at 15%+5% dividend tax (apart from Free zones, but they seem to be a hassle). Natural persons are not taxed on crypto gains. If you're swing trading then Georgia seems ideal but if you're doing 00s or 000s of trades per day then who knows if they change their attitude. I'm currently looking for a tax lawyer to answer this. You're limited on the exchanges that you can use.

UAE: Cheap to set up, pricy to live. Tax wise it's paradise. You're limited on the exchanges that you can use.

Estonia: 20% tax on distribution. I don't know if that makes bookkeeping easier. Seems to be cheaper than other places if you want to set up a fund to trade other peoples crypto. Good access to exchanges.

Cyprus: 12.5% company tax + small health tax on dividends. Good access to exchanges. Better weather than UAE or Estonia.

Gibraltar, Singapore and Cayman are expensive but maybe good if you start trading other folk's money and you're into the really big bucks. Maybe Dubai's DMCC will be interesting once they launch their crypto friendly licenses, if they set it up right and open up banking and exchange coverage.

 

[Silvio]

Move to some tax-free or territorial tax country like Cyprus, Malta, Georgia, etc. I'm not an expert but it may take some time to sever all ties with the UK from HMRC perspective.

Also I would add that you might want to be profitable for a few more months\year before quitting your day job. After all everybody is a genius in a bull market...

 

[petal355]

You can buy cheap real estate and get a resident visa. after the first year you have tax residency(183 days will do but since you are moving, i'd give it full year so UK will leave you alone). if that won't work because you don't have money to buy property there yet, you could try to do the 3x90 day visit to get the 183 days tax residency that way.

I think that if you come with a real estate visa you do not qualify for personnal tax residency at least according to their website as they say they require proof of a local UAE business income

 

[daxbr]

Hi,

I am a UK resident since birth and have started trading in crypto over the last few months. Shortly, this will be my only source of income as I have started the process to finish my day job.

As I understand it, profits from crypto trading will be taxed as Capital Gains Tax, in the region of 10-20% dependant on amount. As I am making a major lifestyle change with quitting my job and that I do not have anything to keep me in the UK, I want to ask for advice/suggestions as to my next step.

Ultimately I want to reduce my tax responsibilities and overall expenditure as much as possible. I am happy to move abroad, setup a company etc to assist with these goals but I do not have the faintest idea of where to begin. I thought best to ask here before I start down the wrong path.

I have no criminal record and nothing to prevent me from moving.

Hopefully this is enough information to get the conversation started.

Many thanks.

What is your trading strategy?

 

[glengoolie]

I think that if you come with a real estate visa you do not qualify for personnal tax residency at least according to their website as they say they require proof of a local UAE business income

After 183 days. The property just gives the visa to stay. I think i was clear enough.

 

[CyprusLaw]

Always the same cyprus advice - what is the reason to pay up to 35% income tax on capital gains in cyprus (because regulation is unclear) while in the UK he would pay 10-20%? More tax, more risk!

It is clear that there is not CGT! CGT is linked with immovable property in Cyprus.
Also income tax is in bands, 35% is the final band. But the advice was to set up a company, not to trade as an individual!!!

 

[petal355]

After 183 days. The property just gives the visa to stay. I think i was clear enough.

I mean even after 500 days, if you just own a property and get visa throught it, then live in dubai 500 days in a row it doesnt seem that you qualify for tax residence as for example for getting their tax reseidence certificate, need a proof of income in UAE which is not given by the only fact of owning a property

 

[glengoolie]

The requirements(that I found) are:

1. Passport Copy
2. Valid Residence Copy
3. Certified Tenancy Contract / Title Deed.
4. Certified bank statement for at least 6 months during the required year.
5. Source of Income/Salary Certificate.
6. Immigration Report of residency (Exit & Entry report)

so we have two cases here. If you earn income, you have a proof of that and can request the tax certificate. If you do not have income and just live in UAE without working, like any other b/millionaire there, who live mostly from passive dividends, then there is no need for it since there is nothing to disclose to anyone. Tax returns, in general, are not mandatory by law if you have nothing that is subject to tax. It depends on the jurisdiction but usually you can submit empty tax return or not submit it at all. Sometimes people just need the proof that they submitted their tax returns for that year for some things so they will submit empty one. This to me is the same example for this principle. You have no reason to get the tax certificate unless you need it for something. In that case I fail to see why UAE would not issue you confirmation of you being tax resident there. Remember, people "pay" 0 taxes there, essentially so majority of people don't even bother with this.


(all of the above is just my theory, take it or leave it)

 

[glengoolie]

just to add, you have to severe all ties to your former country of residence and establish new residence. that means no real estate left behind. no direct family. no business. nothing. otherwise you are still considered as resident and you will be taxed on your worldwide income. this is why having residence in territorial tax or no income tax country is the best decision to make. you can be 183 days in UAE and you can get tax certificate for "paying" taxes there but in your former country you will still be taxed on your worldwide income, sans UAE income(or whatever the case might be). so you have to completely sever all ties to the former country and establish residency in the new country by the initial 183 day stay(obviously). this means the center of life, like it was before. you can have a home, a business or a family in the new place which could constitute center of life. once you establish that, this new country becomes your residence that you can always point to when asked. and it will default to be your tax residence for worldwide income and you no longer have to be there 183 days a year, just don't be 183 days elsewhere. hence why buying a property for residence permit is the way to go. if the taxman of your former country of residence challenges you, you will have sufficient proof that your center of life has moved and they should leave you alone. you should look up tax code of your present country and see the definition for taxable entity and when is person considered resident in the country and is subjected to worldwide income. once you move your residence, there should be no need to get certificate for tax returns in UAE since you changed your residence altogether. although there might be exit tax so make sure you check your tax laws before you leave.

 

[khinkali]

@BeardedNomad I completely disagree with the advice you've been given about UK tax residence. The UK has rather specific rules that in my opinion offer much better clarity than most places.

Given that you have been UK tax resident for one or more of the previous 3 tax years, you are automatically non-tax resident in UK if:

• you spend fewer than 16 days in the UK in the tax year, or
• you work full-time overseas (there's an HMRC definition of full-time) over the tax year and you spend fewer than 91 days in the UK

You'll be automatically tax resident if:

• you spend 183 days in the UK, or
• all three of these apply:
  • you have a home (there's a definition for that) in the UK for >90 days and
  • you spend 30 days in that home and
  • you had no overseas home (or spent <30 days in it), or
• you work at least one day in the tax year, which is part of 365 days of continuous full time work (see "split year" comment at the end of this post)

If none of the above apply, you can look at sufficient ties to see how many days you can spend in the UK before becoming tax resident:

• a family tie (wife, partner or kids under 18 in UK)
• an accommodation tie (UK accommodation is available, which could be with family, a property you own or even a hotel where you come back to the same room. It counts if you spend 16 days if with parent, grandparent, sibling, 1 day for non-family)
• a work tie (more than 3 hours of work a day in the UK for at least 40 days in the tax year)
• a 90 day tie (90 days in UK in either of the previous two tax years)
• a country tie (present at midnight for more days in UK than any other country)

See HMRC Statutory Residence Test Guidance and also a nice flowchart from some UK accountants.

You are presumably automatically tax resident for this tax year already due to the third automatically resident test. But HMRC can give you split-year treatment. Basically you convince them that you made a clean and permanent break during the year (e.g. moving home and taking up employment). This allows you to be treated as non-resident after you move, but you need to apply for it. To help keep things simple you might want to liquidate your crypto before leaving, so that you have a clean start in your new location.

 

[JohnLocke]

As I understand it you may need to give up your citizenship where you live and find a different place to take citizenship in order for this to work properly or am I wrong?

 

[John Spectre]

I would suggest *not* doing these.
As a few month experience as a trader is a not enough. Your profit mostly reason because of crypto bull market which will be finished this year. You even don't know what will be with your trading result in bear market.

After it, you probably wont be so successful.
I guess its a better to stay in your lifestyle for 1-2 years and see how it will goes long term.

 

[khinkali]

give up your citizenship

That is true for USA citizens.

OP is UK, so citizenship isn't part of the test. This flowchart gives a good overview.

 

[KHer0]

I think your are planning this totally wrong.

You don't optimize your taxes before making money. Moving from UK right now is the worst thinking ever. No real job, different country you know nothing about, what could go wrong!

Stay in UK till you have stable source of income, and pay the damn 20% taxes. UK is great when it comes to taxes. When you are paying 50K in taxes or something, you can start looking for other opportunities..

 

[BeardedNomad]

Thank you to everyone for your advice and thoughts, they are much appreciated. Clearly there are a lot of knowledgeable people out there and some whom are very passionate on the subject. I will take my time to digest it all and ensure I take all advice on board.

This might not be the case as you're leaving your day job to focus on trading. The point at which you move from capital gain to business income is not very clear. HMRC use words like "organised activity" vs "hobby", or "doing this as a business or trade" vs "investing".

I've tried to seek clarity on this myself however not had much luck.


What are peoples thoughts on Malta as a potential destination? I've never been and have no idea if they have favourable tax conditions however its always been one of those places that kept coming front and center of my mind.