taxes on P2P crypto trading in the UK

So, I've got a buddy who's thinking about moving to the UK. He wants to set up a bank account, get into LocalBitCoins, and start doing some peer-to-peer trading, you know, receiving bank deposits and swapping Bitcoin back and forth. But here's the thing, how does he figure out the taxes on this? What kind of cash can he handle daily? Like, is it cool for him to get $100,000 a day in his bank account, or should he set up a company or a business account for those transfers? And seriously, how’s he supposed to calculate the taxes?

He'll have to register here to provide a crypto trading service (if he wants to be legal): https://www.fca.org.uk/cryptoassets-aml-ctf-regime/register He should be able to do everything from personal accounts (if he wants to and doesn't want the protection of segregating assets and liabilities in a limited company). There are tax registrations that he'll have to complete but those only have to be done by the October of the first year of trading. Multiple bank accounts would probably be recommended (but most have 24/7 customer service lines anyway in case an account is suspended or something - eg if the bank suspects a scam or something). Taxes shouldn't be too hard to calculate either as long as he keeps logs of trades (local bitcoins might be able to offer downloadable statements too) hell just be paying capital gains tax of 10-20%depending on his other income/taxes.

Thank you, I will pass it on to him. How will taxes be calculated for regular account and crypto? Is it annual, after a year, or when selling because I believe that bitcoin is not taxed until after making a profit from the sale. Is it possible for a normal account to receive about $ 100,000 per day, or does it need more papers?

I know jackg has given you some good advice, but this might help your friend too. The tricky issue may well be if your friend will be paying Income Tax or Capital Gains Tax - have a look at this … https://www.gov.uk/hmrc-internal-manuals/cryptoassets-manual/crypto20250 Quote - “ Only in exceptional circumstances would HMRC expect individuals to buy and sell exchange tokens with such frequency, level of organisation and sophistication that the activity amounts to a financial trade in itself. If the taxpayer’s activity is considered to be trading then Income Tax will take priority over Capital Gains Tax and will apply to profits (or losses).” It may well be if your friend is trading with this “frequency”, it may well be considered that it will fall under Income Tax Below examples are taken from… https://koinly.io/guides/hmrc-cryptocurrency-tax-guide/ Crypto Capital Gains Tax rates UK Unlike many other countries, the UK doesn't have a short-term and long-term Capital Gains Tax rate. All capital gains are taxed under the same rates. The amount of Capital Gains Tax you'll pay depends on how much you earn. Here are the 2020-21 rates Tax rate   Taxable income 10%   Basic Rate Income Band (up to £50,270) 20%   Higher Rate Income Band (up to £150,000) 20%   Additional Rate Income Band (more than £150,000) So as you can see, you'll pay either 10% or 20% tax on any crypto gains, depending on what band you fall under. If you earned less than £50,270 in 2021 - you'll pay 10% on crypto gains. If you earned more than £50,279 in 2021 - you'll pay 20% on crypto gains. How much tax will you pay on crypto income? To figure out how much tax you'll pay on crypto income, you need to first know the crypto Income Tax rates. These are the same Income Tax Bands for your regular income. For 2021 - 2022, the Income Tax Bands in the UK are as follows: Tax rate   Taxable income   Band 0%   Up to £12,570   Personal allowance 20%   £12,571 - £50,270   Basic rate 40%   £50,271 - £150,000   Higher rate 45%   £150,000+   Additional rate Hopefully you can see that there’s a big difference with the tax rates , ie , Income Tax and Capital Gains Tax !! It would be worth having a chat with an accountant who’s had experience with crypto clients. These may be hard to find, but most accountants will offer you a free initial consultation- even by phone or zoom. Don’t be afraid to talk to a few different accountants  Some pretty good references https://www.coindesk.com/learn/uk-crypto-tax-guide-2022/ https://koinly.io/guides/hmrc-cryptocurrency-tax-guide/

Adding to what you've put here. There's also 3-6% national insurance that'll be paid in top of those tax rates on income. It's harder to file capital gains than it is income tax too though (hmrc requires evidence for cgt). Yes it's annual after the year (the January after normally - with the tax year ending the previous april 5th). You won't be taxed on profits (eg by the bank) until you file your tax return (and then they'll give you a link you can use to pay through). Tax seems high when you have to pay it all at once in the January (and you're in a higher band) he might think it worthwhile at that point (or anytime after he's finished his balance sheet) to employ a tax advisor to take a look at it to see if they can find any ways to reduce taxes (if he's got all the information ready, they probably won't charge much just to check it over and offer advice). I wouldn't know about how much you can expect to receive and transfer out of your account (and it depends on how you want to do it - you definitely won't get £100k in cash straight out of a high street bank). It'd be better to send a quick email to customer services with banks and be insist on what you actually want from them (such as: a personal account being able to transfer large sums in and out - they might give you advice you don't want or something inadequate because they think they can answer it when they don't actually know how it's handled).