Bitcoins - The Revenue Comes Calling
Watch Out, Watch Out The Revenue are about....
It is that time of year many a self-employed person dreads, the deadline to submit your tax return and pay anything you owe. But this year there is a question a select few should be asking themselves - have I profited from my investment in crypto-currencies? If you have, you could be liable for tax.
In 2014 Revenue & Customs published guidelines making clear the different taxes that apply to any earnings from crypto-currencies.
For most people who have bought a few bitcoins some years ago, it is Capital Gains Tax that will be relevant. This will apply to any profits, once you hit the £11,300 CGT threshold, not just if they are converted into a standard currency but if they are used to buy other crypto-currencies such as Ethereum or to invest in initial coin offerings (ICOs).
But if you are making trading in crypto-currencies a full-time job then, you are likely to be liable for income tax on your earnings.
Now, the acceleration in the value of Bitcoin and other crypto-currencies happened over the course of 2017 so it is unlikely many people will have incurred tax liabilities in 2016-17, the year HMRC is currently examining.
But over recent months there has been a flood of Bitcoin money heading into everything from ICOs to property - so next year there should in theory be a big boost for the government's Capital Gains Tax receipts.
Although, despite the January dip, Bitcoin seems to be going from strength to strength, if you do suffer losses these can be written off against tax, unless the scheme turns to be fraudulent
As always please contact Perspectives Accounting if you have any questions or are in doubt about your tax position.