Cryptocurrency blog post for a firm of accountants in Belfast
Made money on cryptocurrencies? Here’s how you could be taxed.
Cryptocurrencies are a hot topic at the moment. They’re controversial, risky and volatile – but are probably here to stay. Some have experienced phenomenal growth.
The price of Bitcoin, for example, rose from around $1,000 a coin in early January 2017 to nearly $18,000 in mid December 2017, when it peaked. The price has now dropped to around $8,500.
Despite the volatility and risks of cryptocurrencies, some people will make money from them. And when you make money, you pay tax.
So how does HMRC tax cryptocurrencies?
HMRC provided guidance on cryptocurrencies back in 2014. The guidance is a bit out of date now, but the fundamentals remain the same. There are three potential ways you could be taxed:
- Capital Gains Tax (CGT) – if you make gains on cryptocurrency investments, you are likely to be liable to CGT. So it’s important to keep records and declare any gains on your annual tax return.
- Income Tax – if you trade in cryptocurrencies with the aim of making short-term gains, then HMRC may consider you a trader. In that case, the gains would be subject to income tax.
- Gambling Tax (i.e. zero) – this is a tricky one, but should speculating on cryptocurrencies be considered gambling? Generally speaking, if you’ve actually purchased a cryptocurrency then it’s considered a commodity – so any gain would be subject to CGT. But you could potentially bet on them without actually owning any.
Financial authorities may be sceptical of cryptocurrencies, but they’re still keen to tax them – and it’s important to keep that in mind.
Guidance is available from HMRC, but it’s a few years old now.
Here at Johnston Kennedy, we can provide you with up to date advice.
For more information, call us on +44 (0) 28 9045 6333 or
This blog post provides general information only and may not apply to your particular circumstances.