Bitcoin is a digital currency used globally. It is also the first widely used cryptocurrency. Bitcoin allows people to receive or send money across the Internet without an intermediary such as a bank, and without a bank account or being linked to an identity.
Bitcoins are not created by a central bank, but instead created during a process called “mining” (actually involving solving a specific algorithm), done on personal or specialised computers. Another way of acquiring bitcoins is by buying them via a cryptocurrency exchange.
In the UK, bitcoins are considered taxable assets.
When you pay tax on your bitcoin earnings:
If you earn bitcoins through mining them on your computer, then they count as income, and you need to pay Income Tax on their value calculated in GBP. You might also be liable for National Insurance. However, you can expense your mining equipment (computers, electricity, and maintenance).
If you sell bitcoins for a profit, you may need to pay Capital Gains Tax on the profit between the value at which you bought them (or earned them through mining) and the value at which you sold them.
What to do if you made a loss:
To claim a loss or pay either Income Tax or Capital Gains Tax on your bitcoin earnings, you would have to file a Self Assessment tax return.
Hey there! We really hope this article helped you. Tax matters can be a dreadful topic at times. We know. That's why we started TaxScouts.
A stress-free way to getting your taxes done.
Have a minute? See how it works