Bitcoin (BTC) was the first popularised cryptocurrency. Like many other digital currencies, Bitcoin enables you to send money online without an intermediary (e.g. a bank). In the beginning, Bitcoin transactions were all anonymous, but today they are more easily traceable.
BTC is created by “mining” (which involves solving a specific algorithm), and it can be done on a personal or specialised computer. You can also buy Bitcoin on a cryptocurrency exchange e.g. Coinbase.
In the UK, bitcoins are considered taxable assets.
When to pay tax on your bitcoin earnings
If you earn bitcoins through mining, this is considered income and you’ll need to pay Income Tax on their value calculated in GBP. You might also be liable for National Insurance. That said, you can expense your mining equipment (computers, electricity, and maintenance).
What to do if you make a loss
You can claim this loss against other income (for mined bitcoins) or capital gains (for sold bitcoins), either this tax year or the next.
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