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Cryptocurrency

Cryptocurrency (also called “crypto”) is a virtual form of “money” that only exists on the Internet. They are independent from any bank or government.

It’s not the same as your online bank account – for example, if you have a bank account in pounds open at NatWest, that’s not cryptocurrency.

A few examples of cryptocurrencies (by popularity as of 2020):

  • Bitcoin
  • Ethereum
  • Tether (an example of a stablecoin, a crypto that’s pegged to a real currency), etc.

Owning and using cryptocurrencies is legal in the UK but you might need to pay tax on profits made with them:

If you earn cryptocurrencies through mining (basically using your computer to run a program that verifies other users’ transactions, and then getting rewarded for it), this counts as income from self-employment.

You might need to pay Income Tax and National Insurance on the value of the mined crypto (calculated in GBP) if you earn over £1,000 from self-employment (including from mining cryptocurrencies).

However, you can also expense mining costs (computer, electricity).

If you make a profit by selling cryptocurrencies (for example, on an exchange), you need to pay Capital Gains Tax if your profit is over £12,000.

However, if you made a loss (either from mining or selling), you can “carry this loss forward” and claim it next year as your expense against your income (if you mined) or profit (if you sold).

You pay these taxes by filing a Self Assessment tax return.

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