Cryptocurrencies like Bitcoin are 'apolitical' says financial expert
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Cryptocurrencies such as bitcoin, Ethereum and Dogecoin are fast becoming a popular investment for Brits. But the crypto market is highly volatile and investing in cryptocurrencies can be confusing. Here an Expert breaks down the current taxes on crypto and what could be in store for investors in the future.
Cryptocurrency is a virtual or digital currency secured by cryptography.
This makes it almost impossible to forge or to double-spend.
These currencies have attracted a great deal of interest in recent years.
According to Investopedia, they are theoretically immune to government manipulation, as they are not generally created by any central authority such as banks.
Some of the biggest cryptos are bitcoin, Dogecoin and Ethereum.
Despite the market’s reputation for being highly volatile, cryptocurrencies continue to attract investment.
So how are these currencies taxed?
Under current rules, Brits looking to invest in cryptocurrencies in a small way shouldn’t be faced with a heavy tax bill.
Crypto expert, Tim Crook, Head of tax at Gherson Solicitors told Express.co.uk: “At present crypto assets are taxed in much the same way as most other investments (such as shares) and on a disposal, any gains made are within the scope of capital gains tax at 10 percent or 20 percent (subject to a tax-free annual allowance of £12,300)”.
But Mr Crook added a note of caution for those who frequently invest in these digital currencies.
He said: “In the rare circumstance where an individual buys and sells exchange tokens with such frequency, level of organisation and sophistication that the activity is considered to be trading then income tax will take priority over capital gains tax and will apply to profits.
“Individuals will also be liable to pay Income Tax and National Insurance contributions on crypto assets which they receive from their employer as a form of non-cash payment”.
Will there be future tax hikes on cryptocurrencies?
There has been much talk of how the Government will pay for the costly pandemic.
Mr Crook has reassured investors that the recent rise to National Insurance will not make a difference for most investors.
But if capital gains tax rates are raised this could impact crypto investors in a big way.
Any increase in capital gains tax could make investing in cryptocurrencies much more expensive.
Mr Crook said: “For a long time now it has been suggested that capital gains tax rates should increase so that they are more in line with income tax rates.
“The government has so far held off making this change but if this did happen then this would have an impact on crypto investors.
“Any gains they make potentially being taxed at high rates than currently.”
It is unclear when or if increases to capital gains tax will be made.
But owing to the volatile nature of the crypto market you should do your research before you invest and never put in more than you can afford to lose.
Crypto markets are notoriously volatile and are known to be very unpredictable.
The information in this article does not equate to financial advice
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