{"id":10730,"date":"2021-04-14T16:07:31","date_gmt":"2021-04-14T15:07:31","guid":{"rendered":"https:\/\/taxfix.com\/en-uk\/?p=10730"},"modified":"2024-01-29T18:30:27","modified_gmt":"2024-01-29T18:30:27","slug":"are-bitcoins-tax-free","status":"publish","type":"post","link":"https:\/\/taxfix.com\/en-uk\/investor-capital-gains-tax-returns\/crypto\/are-bitcoins-tax-free\/","title":{"rendered":"Are bitcoins tax-free?"},"content":{"rendered":"\n

If you\u2019re thinking of investing in cryptocurrency then you might be asking yourself, \u2018are bitcoins tax-free?\u2019 <\/p>\n\n\n\n

The value of these types of cryptoassets<\/a> has continued to grow significantly, and as a result, more and more people are looking to buy and sell them. If you\u2019re one of the lucky few who invested in Bitcoin early, then you might think that any profits you make from trading them are tax-free. <\/p>\n\n\n\n

Unfortunately, you\u2019re wrong!<\/p>\n\n\n\n

Many people think of cryptocurrency profits as being similar to gambling or a lottery type win; which would make them not taxable in the eyes of HMRC. What many people do not realise is that this isn\u2019t true. Like any form of asset, there are various different tax implications attached to selling\/exchanging Bitcoin.<\/p>\n\n\n<\/div> \n\n

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What is Bitcoin?<\/h2>\n

Bitcoin is a form of cryptocurrency. It\u2019s a token that’s completely virtual, but like pound sterling, it can be used as a payment for goods and services with some retailers.<\/p>\n\n <\/div>\n<\/div> \n\n

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Are bitcoins tax-free and if not, which tax will I pay?<\/h2>\n\n\n\n

HMRC have made it very clear<\/a> that bitcoins and other types of cryptoassets are not tax-free, and are subject to tax like any other asset. However, although they are considered to be a form of digital currency, HMRC doesn\u2019t recognise Bitcoin as \u201cmoney\u201d. Instead, it\u2019s considered a type of personal investment, like property or shares. <\/p>\n\n\n\n

You\u2019ll have to pay tax on your bitcoins if:<\/p>\n\n\n\n

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  1. You\u2019ve sold\/exchanged Bitcoin and made a profit. Any profit you make will be subject to Capital Gains Tax<\/a> (CGT). You\u2019ll only pay CGT on the profit above your Capital Gains Tax allowance. In the 2024\/25 tax year, the CGT allowance is \u00a33,000 (previously halved from the \u00a36,000, the 23\/24 tax year allowance).<\/li>\n<\/ol>\n\n\n\n
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    1. You\u2019ve received Bitcoin from your employer as a type of wage payment. These count as earnings in the eyes of HMRC. You\u2019ll be required to pay Income Tax and National Insurance contributions based on the value of what you receive.<\/li>\n<\/ol>\n\n\n\n
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      1. You\u2019re trading Bitcoin at a high frequency. This is because HMRC see it as a form of financial trade – you\u2019re essentially making enough money to earn an income from it. In this instance you\u2019ll have to pay Income Tax<\/a> and National Insurance<\/a> on the profits you make.<\/li>\n<\/ol>\n\n\n\n

        Do I need to tell HMRC about my Bitcoin profits?<\/h2>\n\n\n\n

        Generally, the answer is yes. <\/p>\n\n\n\n

        If you\u2019re a UK tax resident and you make more than the Capital Gains Tax allowance, then you\u2019ll need to inform HMRC. You do this by paying CGT through a self-assessment tax return. <\/p>\n\n\n\n

        It\u2019s important to disclose all information about your Bitcoin trading to HMRC, as if you don\u2019t, it could result in a hefty fine! In the past few years there has been an increasing number of HMRC enquiries focussing on those who buy and sell crypto assets and who have not paid the correct tax.<\/p>\n\n\n\n

        You can work out how much Capital Gains Tax you need to pay using our CGT tax calculator below!<\/p>\n\n\n

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