If you are resident of UK and a crypto enthusiast, you may be quite happy that your country is not one of those where cryptocurrency is banned.
However, do you have to pay taxes for all the profits you earn by investing in cryptocurrencies if you are in the UK? Let’s find out.
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UK’s Stance Towards Cryptocurrencies
While cryptocurrencies have not really been illegal in this country, the government of the United Kingdom of Great Britain and Northern Ireland have not always had the most charitable stance towards the crypto sector.
Up until now, the crypto space has managed to remain out of the British government’s regulatory ambit. At the same time, they have not been banned, merely going on to thrive in a way allowed by legally uncertain markets.
So what is the country’s stance towards cryptocurrencies really?
Well, earlier in 2018, the government of the UK, especially its Treasury Department, sought to bring crypto under its regulatory control, especially anti money laundering laws or AML regulations.
Since then, the Treasury report has filed a report and preparations for bringing it within governmental jurisdiction is underway. A part of the report states:
“There is limited evidence of the current generation of cryptoassets delivering benefits, but this is a rapidly developing market and benefits may arise in the future”.
The report goes on to say:
“There are substantial potential risks associated with cryptoassets, and the most immediate priorities for the authorities are to mitigate the risks to consumers and market integrity, and prevent the use of cryptoassets for illicit activity.”
Now that we know what your government’s general outlook on cryptocurrencies is, let us find out whether and how much they are going to cost you in taxes.
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Do You Have To Pay Taxes for your Crypto In the UK?
Under the laws of the land, Bitcoin and such other cryptocurrencies are considered to be akin to any form of foreign investments in UK.
Accordingly, the laws relevant to those foreign investments apply. As per the generally accepted accounting practice or GAAP, one is required to file information regarding the earnings derived out of cryptocurrencies separately.
Under FRS 102, you are simply required to calculate your profit in terms of the national fiat currency and then file that in as a part of your income during the taxable financial year.
In order to understand UK’s stance towards crypto taxes, the document we fall back on is the “HM Revenue Customs Brief 9, 2014”.
According to this brief, no special cryptocurrency taxations rules apply, beyond those meant for foreign currencies, either for corporates or individuals.
Moreover, even rewards or profits earned by miners are not subjected to VAT payments as crypto mining is not seen as a legitimate economic activity to be taxed.
However, all goods and services of an economic nature, when paid for in terms of cryptocurrencies, still remain liable to tax payments under regular VAT payment rules.
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