You have likely heard about Bitcoin and other cryptocurrencies in the mainstream media by now, but how many people realise they may need to pay tax on their gains?
HMRC is planning a Bitcoin crackdown in an aim to prevent money laundering and tax evasion. But what are the tax rules?
The price of Bitcoin recently surged to over £13,000, meaning nearly all those who bought the digital currency and still hold it have made a profit.
It has risen dramatically this year, and early backers have made bigger sums still. A £100 investment five years ago would be worth more than £100,000 today.
Some took the opportunity to bank profits as the price of the digital currency climbed past the £13,000 mark – although exchange crashes have caused difficulties for many attempting to sell.
With profits, comes tax – but how exactly does the taxman treat profits from Bitcoin and other cryptocurrencies?
If you have bought actual Bitcoins and made a gain you will likely need to pay capital gains tax, but only when you come to sell them.
However, HMRC have not kept up to date with the surge in cryptocurrencies, so as of yet there is little case law to establish the correct treatment.