In recent months, investors in the cryptocurrency Bitcoin, have made fortunes from their dealings. One crypto winner, who invested in Bitcoin over the past 3 years, now has £150,000 worth of the cryptocurrency. The plan is to cash in on the winnings, but are people aware of the tax implications they could face?
For tax purposes, gaming and gambling profits are exempt however, HMRC does not classify dealings in cryptocurrencies as gambling or gaming. Bitcoin profits are treated in the same way as shares therefore, in most cases, profits will be seen as a capital gain and will be subject to Capital Gains Tax.
Capital gains tax is the tax paid on the profit made when selling an asset that has increased in value. The amount gained from the dealings is the amount subject to tax, not the entire amount received. Capital gains tax currently stands at 10% for basic rate taxpayers and 20% for higher rate taxpayers.
Capital gains allowance currently stands at £12,300 per year. Profits of more than the allowance will be taxed at the appropriate rate. These profits will need to be reported to HMRC by completing a Self-Assessment tax return.
If you are unsure whether Capital Gains Tax rules apply to you, then get in touch with us via our contact page.