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For most of us, the image of a trader is someone sitting in a busy stock exchange, looking stressed out and sweaty or with their head in their hands as the market crashes.
Or, they could be pacing up and down your high street bellowing “Buy! Buy!” or “Sell! Sell!”into a mobile phone, making sure everyone hears them.
But have you considered that you could also be a trader? If you have been buying Bitcoin, Litecoin or any of the others with the specific intent of selling when it rises, only to buy it again when it falls, in the eyes of some fairly important people, you might be classed as a trader.
These fairly important people are Her Majesty’s Revenue and Customs, and if they suspect you are trading cryptoassets, there might be taxes to pay.
Unlike long-term investments, which the government actually likes as it ties in capital into supporting companies, currencies and other projects it doesn’t want to spend the money to do, trading is treated differently.
Trading attracts Income Tax, which is additional to what you pay on your regular earnings. HMRC doesn’t like people earning extra cash – digital, traditional or otherwise – and not telling it, so it could be worth checking up before you file your tax return. Just like your regular income tax though, you are able to offset it against some losses.
However, if HMRC deems you to not be a trader, you don’t get off the hook for your dues. Applicable to UK taxpayers, Capital Gains Tax is due on all profit made from investments and assets that grow in value, is still due to be paid… and no, the Exchequer does not accept Bitcoin.
As cryptos are fairly new – to the powers that be, at least – there are few rules and regulations so far set in place. But it is important to note that these will be tightened up over the coming years and months as they become more mainstream, so keep an eye out for updates.