By Rachel Rickard Straus for Thisismoney. Spend your way onto the property ladder! How to pay through bitcoin received a mailshot offering free entries into the National Lottery – is it a scam?
Fed up with being hit by energy price shocks? 59bn Brits have tied up in Europe safe? Will I have to pay tax if I sell? 4 million at the current exchange rate.
As this is a virtual currency, does that mean I have to declare the sale for tax purposes? I’ve been told any gain is tax free because the money doesn’t really exist in tangible form. Virtual currencies, or cryptocurrencies as they are sometimes known, are becoming an increasingly popular way to transact. As a result the value of some cryptocurrencies has risen beyond belief, and you are by no means unique in having become a bitcoin millionaire. However, cryptocurrencies do have tax implications of their own.
Heard the one about how to make a mint in an ICO? HMRC has not introduced any new legislation that relates specifically to cryptocurrencies as it believes that the existing legislation is sufficient to impose any necessary tax. By far the most popular cryptocurrency is the bitcoin, however there are approximately 1,000 such currencies with others, such as ethereum and litecoins, becoming increasingly popular. ASK AN EXPERT Put your question to our team of independent experts. Individuals can obtain cryptocurrencies such as bitcoins in two ways. One is via ‘mining’, which is a system that allows computer users to calculate complex algorithms required to verify each transaction in the blockchain and be rewarded with bitcoins. The second way is to use a bitcoin exchange to purchase bitcoins with a real world currency such a sterling.
If someone is mining bitcoins then HMRC regards this as a trade and will charge any profits to income tax and national insurance. Income and expenses would need to be calculated in sterling each year with the profits reported to HMRC and tax duly paid. Any expenses claimed would need to relate solely and specifically to the trade of mining. If the bitcoins have been purchased HMRC will regard any increase in value as being liable to capital gains tax. Tax will only crystallise when the bitcoins are converted into another currency, be it sterling or dollars or even another cryptocurrency.