Hey guys, it's sasha bitcoin has exploded in value over the last few months, reaching a high of 58 000 just a few days ago on the 21st of february. Although the price is highly volatile, bitcoin is becoming much more accepted and its use is growing, with apple pay, adding it for the very first time in tesla, reportedly buying 1.5 billion dollars worth of bitcoin anticipation of potentially using it as payment in the future. But among all the excitement, uh many people are confused as to how exactly is bitcoin and other cryptocurrencies. How are they taxed? Does tax apply to them at all? After all, the government should have no say and no ownership and no jurisdiction over bitcoin and crypto right.

Well, the answer is, you do get taxed on it as with pretty much everything in life. Over the last few years, the uk government has introduced a bunch of very stringent, very precise rules on exactly how bitcoin is taxed and to save you trotting through the endless different pieces of paper government websites and things like that. Let me break it down for you. In full precision now i am not a financial advisor.

I cannot provide financial advice to you. This is just purely for educational purposes. If you do need financial advice, please make sure you seek the help of a suitably qualified professional. Now there are two different ways in the uk that you can get taxed on bitcoin.

The first is, if you mine it, in which case you have to pay income tax and national insurance. If you trade or invest, buy, sell bitcoin, then you are subject to capital gains tax as well. First, for anyone who does mine bitcoin, the tax is often something that people don't really consider when they're doing their math and try to understand whether it's actually viable and a lot of people haven't tried buying a graphics card recently. But if you have, you will know that it is almost impossible to buy anything out of any of the new graphics cards available, and that is because a lot of people in the uk, despite the energy prices, are mining bitcoin, just like they are around the world.

Mining basically involves using a graphics card, or some other dedicated hardware to go and essentially work at a hundred percent of its power capacity for the 24-hour cycle of every single day, usually with other people, or sometimes some people choose to do on their own, in a Hope that you will eventually mine some bitcoins then get distributed between those people who are partaking in this kind of stuff in the by process. The same process verifies transactions on the bitcoin blockchain and a bunch of other stuff that i'm going to get into. But anyway, it doesn't matter. If you do it yourself as part of a network, it doesn't matter how you get paid when you get paid in bitcoin directly or whether you get paid in dollars or pounds or whatever else.

If you get some kind of earnings for your processor mining, you have to go and pay income tax, and you have to also pay national insurance contributions. On that earning you have to pay for every single time. You actually earn money. So if you get paid daily, you will have to work this out on a daily basis, which is somewhat frustrating and annoying.

But that is the way it works and what you have to do is if you get paid in pounds, then you will have to pay national insurance and income tax on the pounds amount. But if you get paid in actual cryptocurrency or bitcoin, then you have to work out what the value of that crypto bitcoin was at the precise moment. Usually, on the day when you received it - and you then have to go and do all those calculations convert them into pounds and then those pound amounts will be taxed. So if you are a basic rate, taxpayer you'll have to pay 20 income tax for higher rate payers, it's 40 and it's 45 percent if you earn over 150 000 pounds a year.

Although all of these do change pretty much every single year, remember that not only income tax is due, but you also have to pay national insurance contributions, because this is classed as income, and that is three pounds and five people a week if you earn over. Six thousand four hundred and seventy five pounds from mining plus nine percent of any earnings over nine thousand five hundred pounds on top of the previous tax rates as well. Now, as most people probably are not mining, the tax that you really do care about is the capital gains tax, which applies to trading, investing buying, studying uh, bitcoins or other crypto assets, and the rules here are relatively straightforward. Although there's a few interesting things that you need to know that, i'm going to get to just to make sure that you're fully aware if you go and buy bitcoin at a set price and then at some point later down the line you go and sell it.

At a higher price, then, essentially, you have to pay tax on the difference between those two prices, so that is what scored the gain. So, for example, if you bought one bitcoin today for about 35 000 pounds, which is roughly what it cost at the moment and then at some point in the future, you then went and sold that one bitcoin for 50 000 pounds. Your gain would be 50, minus 30, 15, 000 pounds. Now there is a zero percent tax bracket for capital gains in uk and as it stands, that is twelve thousand three hundred pounds, although that is one number that may change in the budget.

In a few days time so stay tuned, make sure you know exactly what happens with that. This means that for every financial year running from the sixth of april, one year to the fifth of april, the following year, you can earn up to twelve thousand three hundred pounds in capital gains without having to pay any capital gains tax at all, and remember that's Just on the gain, so the amount you earn on top of the money you've invested, this number does change, but remember this applies to all capital gains taxes, so if you make any capital gains on shares, for example, or on other assets like, for example, a second Home or any other things that 12 300 is the total across all different kinds of capital gains. So just be aware of that, however, if you don't have any other capital gains, if the 12 300 that you're going to be using applies only to your bitcoin holdings, then you will have to pay any extra gains above the 12 300 you'll have to pay capital Gains tax on that for higher or additional rate income tax payers, that rate is 20 but for basic rate tax players, only ten percent. So in our example, if the fifteen thousand pounds was the only capital gains you made during a financial year, you would have twelve thousand three hundred pounds out of that that you would have to pay nothing at all on then, the next two thousand, seven hundred the Difference between fifteen thousand and twelve three hundred is the amount that you're actually paying tax and if the sum of the normal income that you earn say your salary, for example, let's say - is twenty five thousand or thirty thousand, which are sort of average salaries in the Uk and that extra 2 700, if the sum of those is less than 50 000, which is currently the bracket for paying higher rates of income tax, then you're only going to have to pay 10 as the capital gains tax on that which is 270 pounds.

Remember 700 extra 10 is 270 pounds. If you go over that 50 000 pound threshold, do you have to pay the 20 tax rate on any amount over the 50 000? If that makes any sense now there are four really important things to note. You owe capital gains tax only if you sell the bitcoins. So if you hold 20 000 bitcoin because you happen to buy them back in 2010 or whatever and you're sitting there going, oh well, i might have to pay tax.

Do i have to pay tax? You? Don't have to pay anything until the moment when you actually dispose of the assets so until you actually sell, or until you actually get rid of the bitcoin in some way, you are not having to pay any capital gains tax whatsoever. If you only sell a small amount, you only had to pay capital gains on the amount that you sold. This is really crucial if you sell and reinvest the money you still own capital gains, and this is really crucial because some people like to go and trade. The different cryptos say, sell some bitcoin buy some ethereum or something else like that.

The moment you sell the bitcoin, you are liable for capital gains tax on that sell, even if the money then goes back into crypto immediately after so that's something really important to remember, and if you are then going to be using that tax-free allowance, then each time You do that sell you're, essentially going to be eating into that allowance. Also - and this is really important for people who like to trade. If you sell and then re-buy the same asset, the same kind of cryptocurrency within a 30-day window, then you'll get no benefit. If the price went down in between so, for example, if the price is some kind of top and then begins crashing down and you sell before it really falls down, and then you re-buy at the bottom.

As far as the tax plan is concerned, your tax treatment on capital gains will be as if you didn't ever sell, so it will still take the price of which you paid the price of which you sold after that whole period and work out the difference. As long as that buy sell happened within a 30-day window, so if you sell an asset you're only going to be able to benefit from the sort of asset going down in price and you're rebuying, if you waited at least 30 days between those two things happening. This is called bed and breakfasting. I'm not going to go into the depths of that, but anyway, capital gains tax also applies if you dispose of the cryptocurrency in any other way.

So, for example, if you go to a shop which happens to accept bitcoin as payment, if you then buy your coffee using bitcoin, that is also classed as disposal, and you will then have to work out each single transaction because it is not treated as currency. It is treated as an asset, how much you sold what the capital gains tax on, that particular sale is or what the gain is and add all those things up at the end of the year when you're doing your self-assessment, so that, then you can pay the Appropriate amount of tax so next time you want to go and spend a load of crypto on random stuff because it's cool just think about the paperwork required and if you really want to do it anyway, for those who do mine, there is one really important thing That might be in the worst bit. If you mine, bitcoin, you have to pay income tax and national insurance when you first mine the bitcoin at the value when you get it because it is classed as income, but you also have to pay capital gains tax. If you then hold on to it beyond the point when you got it so for anyone, mining and then holding you're going to be double taxed on your bitcoins.

Firstly, you pay when you first get them at the income tax rate and then on the capital gains tax on the difference between when you first got the bitcoin and when you disposed of it now, the uk government is increasingly working with a large number of different Exchanges - and this number is going to be only growing over time and certainly all the big ones are progressively beginning to provide information to the government about transactions involving bitcoin with people from the uk. And i would strongly urge people who maybe are watching this and considering are there ways out or maybe are there ways of not reporting things that i personally would strongly recommend not trying to dodge it, because maybe you will be able to get away, but maybe you Will not, and if you don't the circumstances around how it can then turn out can be very ugly, and i personally would not really want to ever end up in that situation. Hope you guys found this useful. If you have, please make sure you smash the like button feature algorithm so that this video can reach more people.

Thank you so much for watching. I really really appreciate it. I'll see you guys later, you.