Bitcoin - Is there tax to pay?

The simple answer is Yes.HMRC, you could say, were ahead of the curve when it came to giving advice around buying and selling bitcoin, with a brief released in 2014, which will likely cover the majority of questions you have.

Your Bitcoin trading questions answered

Here we look at typical questions we hear from clients who buy, trade and sell in bitcoin, and provide the answers you need.

I want to sell my bitcoin, do I need to pay tax?

Whether you are an individual or company, if you sell bitcoin it will be taxed as a capital gain unless you are doing sufficient selling and buying to show you are trading in cryptocurrencies.

I am trading bitcoin frequently and now have 1,000 transactions, how do I calculate the cost of trading when considering my net profit from the sales?

This is where the HMRC briefing note gets hazy and some guidance is needed.We suggest you consider trading in bitcoin as you would trading in shares.  The reasoning behind this is because it is very difficult to determine which bitcoin or part of a bitcoin is actually bought and sold.If you are trading in shares, the usual process is to pool trading costs, which is then offset against the profit.

I was paid in Bitcoin for some work completed, how do I know how much the Bitcoin is worth?

Usually, if you are paid in Bitcoin for work completed, this relates to an invoice you have issued, which will reflect the sterling amount the bitcoin is worth.  When you receive the Bitcoin, it will be revalued back into the sterling amount.Something to be aware of - it can take time for bitcoin to be changed into sterling or cash.  Which means that the final amount you receive could fluctuate wildly from the original amount that was invoiced - most of us aware of the headlines of large fluctuations in the cryptocurrency market on a day to day basis.This could obviously go either way - you could be out of pocket or do better out of the transaction, a risk you will have to consider if you are prepared to accept bitcoin as an individual or business.

How am I taxed if I switch between currencies?

Again, consider the transaction as you would when working with shares - you will be taxed accordingly for each transaction and you will be taxed when bitcoin is bought or sold.

Mirandus are your local tax advisers

We take a personal approach to your tax needs. When you come to us for tax planning advice, whether an individual, sole trader or limited company, we will assess your financial position and assets with a view to making sure you pay the right amount of tax.

A proactive approach to tax is key and one we adopt at Mirandus, contact us to see how we can help.Informed by our detailed knowledge of your affairs, we explore the best options to help manage your tax obligations most effectively.

Mirandus Accountants are your local accountants and tax advisors in Farringdon, Holborn, Clerkenwell, Blackfriars, Old Street and also Edinburgh & the Lothians, providing accounting services, tax returns, corporation limited annual accounting and are your trusted tax advisor, providing national and international advice.

You can contact us for a tailored solution to your unique business circumstances.Whether you are an individual, freelancer, contractor or you run a small or medium sized owner-managed business, sole trader or limited company, we can help to minimise your tax burden with our tax planning and tax advice services.