Bitcoin
If you mine, or buy and sell Bitcoin or other cryptoassets you may be generating taxable income or capital gains which should be disclosed to H M Revenue & Customs.
Income tax
If you are mining Bitcoin, then the value of any Bitcoin that you successfully mine is subject to income tax, most likely as miscellaneous income.
H M Revenue & Customs have indicated that only in very rare cases would they consider the organisation and extent of mining activities to be sufficient to constitute a trade, but where this is the case then the income will be trading income and taxed accordingly.
Depending on circumstances, the recently introduced trading allowance of £1,000 could be available to reduce the taxable miscellaneous or trading income.
Capital gains tax
Most Bitcoin investors will be involved in buying and selling the cryptocurrency rather than mining and the gains and losses arising on these transactions will be subject to capital gains tax.
The good news here is that an individual’s annual exemption will be available (£11,700 for 2018/19 and £12,000 for 2019/20) so only significant gains will be taxed. Capital gains tax rates of 10% for basic rate payers and 20% for higher rate payers will apply.
The various matching and pooling rules that apply to the buying and selling of shares will in general apply to Bitcoin transactions.
In those rare cases where buying and selling activities constitute a trade the gains and losses will again be subject to income tax as trading income.
H M Revenue & Customs issued some detailed guidance as to the tax treatment of cryptocurrencies in December 2018, which can be found at this link.
Alternatively, if you have any queries or concerns about your own Bitcoin transactions and whether these should be disclosed to HMRC please get in touch. Contact details can be found here.
