Do you have to pay tax on bitcoin?

Bitcoin has seen a dramatic increase over the past 12 months and investment in the cryptocurrency and other cryptocurrencies continues to surge. However the big question for most investors is, do you have to pay tax on cryptocurrencies in the UK?

Millions of people jumped on the bitcoin and cryptocurrency bandwagon towards the end of 2017, following on from cryptocurrency’s dramatic surge in value.  Bitcoin for example surged from circa $1,000 in January to highs of $20,000 in December. 

The extraordinary rise of Bitcoin sparked confusion among investors, due to the fact HM Revenue and Customs did not have any concrete tax laws in place. 

HMRC published a guide to cryptocurrency taxation in 2014, which at the time was to be reviewed on a case by case basis.

So, for investors who are unsure on the tax laws, here is a guide to Bitcoin and cryptocurrency taxation in the UK. 

Do you have to pay tax on Bitcoin?

The simple answer is Yes. If an individual buys and sells any Bitcoin or other cryptocurrencies and it appreciates or depreciates in value between buying and selling, the gain is taxable and the loss is an allowable capital loss.
The tax rules also apply if one cryptocurrency is traded for another.  For example, if a Bitcoin is sold to purchase Ethereum, the Sterling value of Ethereum is deemed to be the sale proceeds.  This will crystallise a gain or loss with a new base cost for the new cryptocurrency purchased.

The taxable gain depends on the circumstances the individual is trading in cryptocurrencies.  If an individual is not trading on a day to day basis it is likely that Capital Gains Tax (CGT) will apply to any disposal as opposed to Income Tax.  The rates for CGT are much lower with rates of 10 or 20 percent depending on any other income. 

Every UK resident is entitled to a CGT allowance of £11,300 (2017/18) so if any gains for the year are less than this amount, there is no further tax due. 
There will no doubt be some updated guidance and legislation from HMRC on the matter outlining how they intend to treat these gains and losses.

Contact our team

Contact us for a free, no obligation quotation or to discuss further if you are in any doubt as to whether you are affected.

A quick call to our team will put your mind at ease and we will be able to quickly advise on your situation.

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