Crypto people hate crypto tax.
As as tax advisor I’m often asked how to save tax on my cryptocurrencies and in most cases, I have to say, it’s very difficult. It is what it is, you bought it, you sold it and you are going to pay capital gains tax at 10-20%. People will ask me if they should buy their crypto through a company to save tax – well with corporation tax at 19-25% (with a fixed 25% on investment businesses) you’ve actually made the problem worse.
Tax Free Crypto?
So what if there was a vehicle where you pay no tax on your crypto? Where your staking rewards are tax free. Where your disposals are tax free. It’s inheritance tax free and you can potentially draw down over a quarter of a million tax free? Sounds great doesn’t it – so where is this fantastic tax doge (get it)? Panama/BVI/Cayman? Well no, it’s in a UK registered pension scheme.
So why doesn’t everyone do it?
The problem is that most pension trustees would consider crypto far too risky to invest into. But what if you were the trustee running your own pension? You can decide what’s too risky and what’s not too risky. I’m pleased to say that this is possible with what’s known as a Small Self Administered Scheme (SSAS). A SSAS is a type of pension set up by an employer for a limited number of individuals (usually less than 12) – usually the key owners/managers of the business. SSAS rules allow (and encourage) the members of the pension scheme to also be the trustees and to make the decisions with regard to investments made by the scheme (and the scheme attitude to risk). This gives SSAS schemes the flexibility to invest into a wider selection of investments, including crypto.
So what can I do?
This means that you can:
- Buy crypto with existing pension funds
- Get tax relief on contributions into the pension scheme to buy crypto
- Sell your existing crypto to the pension scheme and release cash
So why doesn’t everyone do it?
So does it suit everyone? Absolutely not. To make this work you need to have an active company/business and you need at least £50k in pension funds to transfer in or an intention to make pension contributions of at least £25k to make it worthwhile. There’s also professional fees to cover off with the setup and ongoing costs.
How do I help?
You should also note that I cannot give you financial advice as to what to do with your pension funds (or in any way). I’d say you should get financial advice, but good luck with that, as no financial advisor in their right mind would recommend an investment of more than about 3% of your portfolio into crypto. If you do decide to go down this route you do so at your own risk and as we all know, crypto is risky.
However, I can advise you and your business on the tax benefits of a flexible scheme, introduce you to pension providers who can help and will allow you to invest in crypto, assist with the set up of pension friendly crypto exchange accounts and more.
If this is something you’d like to have a discussion about drop me an email – anthony@fusionpartners.co.uk