IT Pro is supported by its audience. When you purchase through links on our site, we may earn an affiliate commission. Learn more

HMRC to change Bitcoin tax rules

HMRC sets out plans to treat virtual currencies in the same way as pounds and dollars.

cash

Digital currencies such as Bitcoin are to be subject to corporation tax, income tax and capital gains tax, according to guidelines set out by HMRC.

The document does not refer to cryptocurrencies as currency', but states they will be treated the same way as traditional monies like pound sterling or the dollar.

Previously, Bitcoin and its peers, such as Litecoin and Dogecoin, had been treated as vouchers and thus subject to VAT, but this has now been scrapped.

The change in tax regime means users of digital currencies will be charged depending on their income and profits, rather than a flat 20 per cent per transaction.

The highest cryptocurrency earners in the UK could be charged up to 45 per cent in income tax, up to 28 per cent in capital gains tax and up to 21 per cent in corporation tax.

The move sees the UK following in the footsteps of Germany, which also recently switched away from VAT to charging income and profit-based taxes, and is part of a wider trend to normalise the way cryptocurrencies are dealt with.

Although the Financial Conduct Authority, which oversees the financial services industry in the UK, has said it does not regulate digital currencies and has no intention of doing so, the European Banking Authority (EBA) is examining their use and considering possible Europe-wide regulation.

The body has created a taskforce to examine the risks to consumers using Bitcoin and others, as well as looking at the use of cryptocurrencies for money laundering and the purchase of illegal goods, and will discuss what kind of regulations, if any, should be put in place.

Any laws implemented off the back of this consultation would affect all European Union residents, including those in the UK.

The change in HMRC's treatment of cryptocurrencies follows the collapse of Mt. Gox, formerly the largest Bitcoin exchange, which filed for bankruptcy on 28 February.

The organisation confessed it may have lost up to half a billion dollars worth of coins following an attack on its systems, affecting 60,000 customers in Great Britain and 180,000 in the US.

The vice finance minister of Japan, where the exchange was headquartered, has since called for global uniformity in the regulation of Bitcoin.

Featured Resources

Four strategies for building a hybrid workplace that works

All indications are that the future of work is hybrid, if it's not here already

Free webinar

The digital marketer’s guide to contextual insights and trends

How to use contextual intelligence to uncover new insights and inform strategies

Free Download

Ransomware and Microsoft 365 for business

What you need to know about reducing ransomware risk

Free Download

Building a modern strategy for analytics and machine learning success

Turning into business value

Free Download

Recommended

What is cryptocurrency mining?
cryptocurrencies

What is cryptocurrency mining?

23 Feb 2022
IMF urges El Salvador to remove Bitcoin as legal tender
cryptocurrencies

IMF urges El Salvador to remove Bitcoin as legal tender

26 Jan 2022
El Salvador announces plans to build a 'Bitcoin city' at the foot of a volcano
cryptocurrencies

El Salvador announces plans to build a 'Bitcoin city' at the foot of a volcano

22 Nov 2021
Cryptocurrency: Should you invest?
cryptocurrencies

Cryptocurrency: Should you invest?

27 Oct 2021

Most Popular

Windows Server admins say latest Patch Tuesday broke authentication policies
Server & storage

Windows Server admins say latest Patch Tuesday broke authentication policies

12 May 2022
Costa Rica declares state of emergency following Conti ransomware attack
ransomware

Costa Rica declares state of emergency following Conti ransomware attack

10 May 2022
16 ways to speed up your laptop
Laptops

16 ways to speed up your laptop

13 May 2022