Do I pay tax on Bitcoin gains?
Samuel Ajala
Fractional CFO | I help ambitions founders scale through Data-Driven Insights with my team of finance professionals | Working with venture and private equity backed scaleups
In short, the answer is yes.
In December 2019 HM Revenue and Customs published their guidance document on cryptoassets for individuals, covering 'exchange tokens' (exchange tokens are intended to be used as a method of payment and encompasses cryptoassets like Bitcoin) and HMRC make it very clear that profits from buying and selling Bitcoin and any other cryptoassets are subject to tax.
Broadly, the rules are as follows:
Individuals
- Anyone buying and selling Bitcoin in an individual capacity is most likely to be subject to UK Capital Gains Tax (CGT) on any gains made.
- For those who are considered as trading in cryptocurrencies (i.e. buying and selling with a high frequency), Income Tax may be due on the profits as trading income. HMRC’s view is that only in exceptional circumstances would it expect individuals to buy and sell cryptoassets with such frequency, level of organisation and sophistication that the activity amounts to a financial trade.
Employment/Consultants
- For those who receive cryptoassets as a non-cash payment for employment, there are Income Tax and National Insurance Contributions (NIC) implications to consider as you have with cash payments.
For the vast majority of individuals who are buying and selling Bitcoin or other cryptoassets, they are more likely to be within the scope of CGT rather than income tax. However, the facts of each specific case will determine the position.
Source: This is Money.co.uk