Author: JW / / Latest News
In recent days it seems you can’t turn a corner without someone mentioning Bitcoin. Maybe you have or know someone who has Bitcoin or you do personally. But is Bitcoin taxable? Do I have to pay CGT?
What is Bitcoin?
Bitcoin is a cryptocurrency. A cryptocurrency is a virtual currency that isn’t centralised. That means it isn’t governed by a central bank, like the Bank of England for example.
It was first created in 2009. It was created by an unknown person/people that go by the name Satoshi Nakamoto.
Bitcoins have to be ‘mined’ through computers solving complex algorithm. When it has been solved, the person responsible is then rewarded with Bitcoin. This is done through a network of people. A single Bitcoin is made up of 1 million bits. It is said that there will only ever be 21,000,000 Bitcoins possible to create. It is predicted that this will be reached in 2140.
At the time of writing, a single Bitcoin is equivalent to £7026.90.
Big companies have started accepting it as a currency such as Microsoft and Subway. There are even Bitcoin ATM’s, with the first in the UK appearing in Shoreditch, London.
Why is it so Popular?
Bitcoin originally had a bad reputation. It was linked with criminal activity and buying taboo items. But recently it’s legitimate uses have surpassed this and is now rather popular.
Because it is decentralised and peer to peer (direct to a person/business), it doesn’t incur the bank transaction fees that other purchases do. Because of this it is usually faster for the payment to go through.
Due to it being a decentralised currency, it also doesn’t have the danger of being affected if the banks fail.
If you are mining Bitcoin:
HMRC regard it as trade. This means profit will incur income and national insurance charges. Income and expenses will be calculated in Pound Sterling each year when the profits are reported to HMRC and the tax paid. Expenses will have to relate solely and exclusively to the trade of ‘mining’.
If you are purchasing and selling:
HMRC regard any increase in value liable to CGT. It will be taxed when it is converted into a currency other than Bitcoin. This could be Pound Sterling, Dollars or another cryptocurrency for example.