Is a Limited Company the Best Way to Invest in Crypto?

The Tax Problem with Personal Crypto Investments

If you invest in crypto as an individual in the UK, you are subject to Capital Gains Tax (CGT) when you sell your assets for a profit. The CGT rates are:
✔️ 10% on gains within the basic tax band (if your total income and gains are under £50,270)
✔️ 20% on gains if you are a higher-rate taxpayer (earning over £50,270)
✔️ Annual CGT exemption of £3,000 (for 2024/25, reduced from £6,000 in 2023/24)

For active traders, crypto profits might even be treated as income rather than capital gains, meaning you could face Income Tax rates of up to 45% instead!

Let’s consider an example:
📌 You earn £50,000 from your salary and make an additional £30,000 in crypto gains in a tax year. Since you’re already a higher-rate taxpayer, your crypto gains will be taxed at 20% after the £3,000 CGT exemption.
💰 Tax paid: (£30,000 - £3,000) x 20% = £5,400

And if your crypto profits were considered trading income instead of capital gains, you could be taxed at 40% instead of 20%, meaning a whopping £12,000 tax bill!

How a Limited Company Can Reduce Your Crypto Tax Bill

If you invest in crypto through a UK limited company, your profits are subject to Corporation Tax, which is currently 25% for profits over £50,000 (or 19% for small profits under £50,000). This can be far more tax-efficient than paying 20-45% as an individual.

Here’s what that looks like:
📌 You set up a limited company and your company makes £30,000 in crypto profits.
💰 Tax paid: £30,000 x 19% = £5,700 (if under £50K total profits) or £7,500 (if over £50K total profits)

Compared to the personal tax scenario, your tax bill is similar if under £50K in company profits but significantly lower if your gains were subject to 40% or 45% income tax. The real benefit comes in tax deferral and control over how you take money out.

Key Benefits of Using a Limited Company for Crypto Investing

✅ Lower Tax Rates – Corporation Tax (19-25%) is often lower than Capital Gains Tax (20%) or Income Tax (up to 45%) for individuals.

✅ Tax Deferral – Unlike personal investments, where tax is due as soon as you sell, company profits can remain within the company and only be taxed when withdrawn.

✅ Deductible Expenses – You can offset business-related costs like trading software, research tools, and even professional advice, reducing your taxable profit.

✅ Flexible Withdrawals – Instead of taking all profits as salary (which would be taxed as income), you can pay yourself via a mix of salary, dividends, or director’s loans, allowing you to manage your tax bill strategically.

✅ Reinvestment Opportunities – Keeping profits within the company means you can reinvest in other assets, property, or stocks without additional tax burdens.

✅ Inheritance Tax Planning – Passing assets through a company structure can sometimes be more tax-efficient than holding them personally, especially for long-term wealth planning.

When Is It Worth Setting Up a Limited Company for Crypto?

A limited company makes the most sense when:
✔️ You expect to make significant crypto profits (£30K+ annually).
✔️ You are already a higher-rate taxpayer (earning £50K+), meaning personal CGT or income tax rates would be higher than Corporation Tax.
✔️ You plan to reinvest profits rather than withdraw them immediately.
✔️ You are trading crypto actively rather than just holding long-term.
✔️ You want to reduce tax liability through strategic withdrawals (dividends, salary, etc.).

If you're only making occasional trades or small profits, the admin and costs of running a company may not be worthwhile. But for serious investors and traders, the tax savings and flexibility can be substantial.

Thinking About Setting Up a Crypto Investment Company? We Can Help.

Setting up and managing a limited company for crypto investments requires careful planning to ensure compliance with HMRC regulations. At Crypto Tax Accountants, we specialise in helping crypto investors and traders structure their investments tax-efficiently.

📩 Get in touch today to discuss whether a company is the right move for your crypto investments. Let’s make your crypto work smarter, not harder!

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