Do You Need to Pay Tax on Cryptocurrency?

Do You Need to Pay Tax on Cryptocurrency?

By SiliconIndia   |   Wednesday, 16 January 2019, 17:08 IST
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Do You Need to Pay Tax on Cryptocurrency


Ever since Bitcoin launched in 2009, cryptocurrency has really taken off. It is used online for all sorts of transactions from shopping to gambling. Safe and secure for both buyer and seller, it is probable that this currency is only going to go from strength to strength. If you deal with cryptocurrency on a regular basis, you need to ensure that you are fully informed of all the legal areas it operates in. One such area has the question of whether or not you need to pay tax on cryptocurrency.



VAT



Ordinary transactions like you would undertake in any shop around the world may have some sort of sales tax added to it. In the UK, this tax is called Value-Added Tax or VAT and it's paid on goods or services purchased.



However, VAT does not apply to cryptocurrencies. If you make certain transactions using Bitcoin – for example, using Bitcoin to pay for a piece of furniture for your house – then you will not have to pay VAT on this purchase.



Cryptocurrencies might not be subject to VAT, but they are definitely subject to other forms of tax. We shall briefly cover them here, but you should talk to a cryptocurrency tax lawyer like those at Stuarts Walker Hersant Humphries if you wish to know more details.



Capital Gains Tax



One of the taxes which does apply to cryptocurrency is the capital gains tax. One of the primary uses of cryptocurrency is trading. You convert a standard currency such as pounds sterling into Bitcoin, and you can then trade the Bitcoin up or down to generate more. By doing so, you are making a profit; a profit you must pay tax on like in any other business venture.



When you buy Bitcoin, HMRC will be aware that you are doing so and they will keep track of your activity online. If you sell a large amount of Bitcoin, you can expect a letter asking for a tax return shortly after.



Cryptocurrency for Commercial Purposes



It is entirely possible to integrate cryptocurrencies as an ordinary part of your business. They provide excellent trading opportunities and are brilliant for diversification of your assets. However, you as a business owner need to ensure that you are trading correctly.



By contacting a cryptocurrency expert, you will be able to write up a secure business plan with all the actions you need to take. This plan will also include precisely where you will be taxed when using cryptocurrencies, and how best to balance them in your books.



Cryptocurrencies are fast becoming incredibly important digital tools. If you are interested in expanding into the realm of cryptocurrencies, you are first going to need to find a qualified expert who can help you. Do not get caught out by any sudden tax bills from trading unawares. With a sensible head and a lot of preplanning, you can easily implement cryptocurrencies without having to pay large amounts of tax on your use of them.



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