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Where Taxpayers and Advisers Meet

Crypto conundrum!

HankMarvin
Posts:2
Joined:Wed Jul 13, 2022 10:51 am
Crypto conundrum!

Postby HankMarvin » Wed Jul 13, 2022 11:45 am

Hello!

I am a Husband and Father, currently on low income claiming child/working tax credits.
Last May I deposited a significant amount of cryptocurrency (that I had mined) into several CeFi platforms, such as Celsius, Hodlnaut and the like. I understand that the yield generated from these platforms is regarded as income for tax purposes and have been making the appropriate steps to account for this (Koinly). My 'earnings' from all these platforms amounts to around 54K, giving me approximately £14500 in income tax and national insurance to pay, in addition to my job.
Here's the problem, the platform for which I have most of my crypto on has stopped operations due to market conditions and I am unable to withdraw any of the profits.
I have not yet submitted my tax self assessment report for 21/22.
This leads to a few questions:

1) How can I pay the taxes for earnings I am unable to access, what are my options here?

2) We need to renew Tax credits, if I report my earnings, we will get nothing. again, what are my options?

Any advice on how to proceed would be appreciated!

Jholm
Posts:360
Joined:Mon Mar 11, 2019 4:22 pm

Re: Crypto conundrum!

Postby Jholm » Thu Jul 14, 2022 8:50 am

It is very unlikely this is assessable to income tax. More likely is capital gains tax. The nature of your trading would need a review to confirm this but it is very uncommon for it to be deem a self-employed business as opposed to capital investments.

The tax would be due whether the funds are withdrawn or not. It's taxed at the point of sale/transfer, not withdrawal. In your instance, youmay well be able to set up a payment plan with HMRC on account of being unable to draw funds from the portfolio.

If assessed to capital gains tax, which is likely, it has no impact on tax credits, as these are income-based.

bd6759
Posts:4262
Joined:Sat Feb 01, 2014 3:26 pm

Re: Crypto conundrum!

Postby bd6759 » Thu Jul 14, 2022 11:21 pm

I don’t think he is buying and selling, so CGT is a bit of a leap.
These platforms lend and borrow against crypto assets. There is s good chance it is income, but I don’t know enough about it.

£54k is a huge return unless you have significant crypto assets. Whichever, you ought to have declared both your assets and your income got tax and tax credit purposes.

pawncob
Posts:5090
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: Crypto conundrum!

Postby pawncob » Fri Jul 15, 2022 11:32 am

https://www.gov.uk/guidance/check-if-you-need-to-pay-tax-when-you-sell-cryptoassets
https://www.gov.uk/guidance/check-if-you-need-to-pay-tax-when-you-receive-cryptoassets
It's a minefield (scuse the pun)
With a pinch of salt take what I say, but don't exceed your RDA

HankMarvin
Posts:2
Joined:Wed Jul 13, 2022 10:51 am

Re: Crypto conundrum!

Postby HankMarvin » Fri Jul 15, 2022 3:15 pm

Thanks for taking the time to reply folks!

You're right bd6759, I am not trading any crypto. I am simply earning interest on my assets. According to what I have read on the gov.uk site and here on Koinly:
https://koinly.io/guides/hmrc-cryptocurrency-tax-guide/
The 54k interest earned is classed as income.

The plan is to register as a sole trader before the deadline on the 5th of October, which gives me until the 31st Jan 2023 to submit my tax return and pay the tax I owe.
Hopefully, the platform (Vauld) will begin allowing withdrawals before the deadline for my payments and the problem will become moot.

If this doesn't happen and my assets remain locked, is there any recourse I can take that won't accrue loads of interest? Happy to pay the taxes, if only Vauld would let me!

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: Crypto conundrum!

Postby AGoodman » Mon Jul 25, 2022 5:11 pm

I'm afraid I can't answer your main question but why register as a sole trader? Do you just mean register for self assessment?

Registering as a sole trader could just be plain wrong but also could lock you into treating all your crypto profits as income (including actual capital gains) past and future.


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