Do You Pay UK Tax On Cryptocurrency?

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Cryptocurrency came into being in 2009 when bitcoin was released into the world. A self-proclaimed Satoshi Nakamoto released the first-ever version of bitcoin that’ll serve as a blueprint for other, newer bitcoin currencies existing today. Because of Nakamoto pioneering this, Bitcoin became a means to have online transactions with smooth and hassle-free transactions.

 

From then on, cryptocurrency has moved on and found value in the exchange of goods and services, and can now even be taxed in the UK and many other countries. 

 

What Is Cryptocurrency?

Cryptocurrencies can be considered virtual money in the form of data and encrypted with encryption. It’s not like its physical counterpart, like tokens, dollars, and coins. It relies on blockchain technology that keeps track of all its transactions as well as its verification. Both the recipient and the receiver share these distributed ledgers so both parties can keep track of what’s happening with the transaction between them.

 

How Is Cryptocurrency Taxed?

Taxes were imposed on cryptocurrencies based on a 2014 IRS rule that states it should be treated as a capital asset, like bonds for example, instead of a physical one. Though it seems simple enough, it opened many difficult times for some owners due to its complicated nature. 

 

Every time you purchase a good or service via cryptocurrency, and somehow its value rose sometime during when you held it, you’ll still be taxed based on the present value it has. According to experts, the IRS decided on this because of how many people have treated cryptocurrency as an investment instead of a currency. 

 

Explaining Capital Gains And Capital Losses

One thing to give solace to many Bitcoin owners is the fact that taxes can only be imposed on cryptocurrency if you sold, spent it, and gained a profit. If you sold it at a loss instead, you won’t be charged for any taxes. 

 

For example, if you had bought your bitcoin for 7000 pounds and sold it for 10,000 pounds, then you’ll be owing to the government 3,000 pounds. However, if you sold it for 6,000 pounds, you will be exempted from being taxed. 

 

Advantages Of Using Bitcoin

 

  1. Autonomy

 

One of the best things about digital currencies is the complete control of the owners over them. Unlike flat currencies, where third-parties are involved, you can choose when and how to spend your money without the bank holding your finances for you.

 

  1. Top-notch Confidentiality

 

There’s no way any data will leak out unless the user publicizes their transactions. Purchases can be rarely traced back to the buyer, and no information, personal and important, can leave footprints behind. 

 

  1. Cheaper Fees For International Transactions 

 

Conversion, wire transfers, and foreign purchases can be expensive most of the time, using bitcoin has been saving a lot of users time and money. When using Cryptocurrency, there exists no middle-man, intermediary, or government involved, the costs are always low. 

 

This fares well with those who travel often. Since cryptocurrency can turn into a currency needed for the situation and costs less than converting one currency into another, it can save time and money on the recipient’s part. 

 

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Annette Ferguson

Annette Ferguson

Owner of Annette & Co. - Chartered Accountants & Certifed Profit First Professionals. Helping Online service-based entrepreneurs find clarity in their numbers, increase wealth and have more money in their pockets.